AROUND 50,000 financial firms - including payday lenders and debt management companies- will come under stronger “hands on” supervision from April 2 to make sure they are putting their customers’ interests first.
The Financial Conduct Authority (FCA) will take over regulation of the £200 billion-a-year consumer credit market and its chief executive Martin Wheatley has promised that the body will wield its powers to tackle “any firm found to be overstepping the line”.
It expects that around one quarter of the 200 payday firms currently operating will find its higher consumer protection standards too tough to meet, forcing them to quit the market.
FCA regulation will apply to firms offering overdrafts, credit cards and personal loans, selling goods and services on credit, offering goods for hire, or providing debt counselling or debt adjusting services to consumers.
The FCA came into being a year ago to make sure firms are putting consumers at the heart of their business models and stop them pushing unsuitable products. The regulator can impose unlimited fines, compel businesses to give consumers their money back when they have lost out due to poor treatment and ban misleading adverts.
The body, which is taking control of the consumer credit market from the Office of Fair Trading (OFT), has promised to be particularly “hands on” with firms considered higher-risk, including those offering debt management and payday loan services.
Martin Lewis, founder of consumer help website MoneySavingExpert.com said: “We desperately needed a change, because credit regulation has not been good enough. I think the Financial Conduct Authority is better placed, better resourced and it has got far more power to intervene.”
Richard Lloyd, executive director for consumer group Which?, said there are “encouraging signs” that the FCA will start cleaning up the consumer credit market immediately. He said: “We’d like the regulator to show it means business by ensuring that lenders do more to help customers in difficulty, and by clamping down on excessive fees.”
The regulator will swoop in on payday lenders and debt management firms from day one. Payday lenders will immediately face a new inquiry to see how sympathetic they are when customers struggle to pay back their debts and if they are putting too much focus on chasing profits. Payday lenders will have to provide financial health warnings in emails, online and in texts and signpost people to free debt help.