Urgent action needed on multiple payday loans
12 December, 2013
StepChange Debt Charity has welcomed the Government’s confirmation, last night, that payday lenders are on a deadline and face the threat of regulatory action if they fail to introduce a data sharing system that helps stop people getting into difficulty with multiple payday loans.
The announcement came during a debate on an amendment to the Banking Reform Bill. Financial Secretary to the Treasury, Sajid Javid, told MPs the clear message for payday lenders is that the Financial Conduct Authority is ready to step in with the powers to take “urgent action” if lenders don’t improve their systems by the end of next year.
The announcement coincided with a letter to the Government from the chief executive of the FCA, Martin Wheatley, stating that the regulator would “not hesitate to act” if the industry does not improve its data sharing processes quickly enough.
All payday lenders currently issue loans without being able to tell whether or not a borrower has an existing payday loan. One of the key reasons is because loan data on people’s existing short-term credit commitments is not shared in real-time.
Commenting, StepChange Debt Charity’s Head of Policy, Peter Tutton said:
“This is a positive message from the government and we welcome the support and engagement of Parliament on these important issues. At the moment, over two thirds of the people we see falling into difficulties with payday loans have been lent overlapping loans by different payday lenders.
“While lenders are spending millions of pounds every year to entice new customers, they are clearly reluctant to invest in systems and processes to ensure responsible lending.
“Payday lenders have no excuse. They need to stop trapping people in debt and start real-time data sharing immediately.
“The new regulator needs to get on top of problems across the industry quickly. The FCA must set out a clear timetable for action that prevents lending to borrowers with existing payday loan debts.”
Notes to editors
- The Financial Secretary to the Treasury said: “The Government fully agree[s] that urgent action is necessary to tackle [the issue of data sharing]. The whole system needs to improve to support responsible lending... I have had discussions with the FCA about this. We expect that by the end of next year the process will be set up… [t]hat is the time scale that the industry is working towards” (Hansard: 11 December 2013, c305).
- Sajid Javid was responding to a Labour amendment to the Banking Reform Bill. The amendment would have given the FCA a specific duty to take action to ensure payday lenders use up-to-date information about whether borrowers have existing payday loans before deciding whether or not to lend.
- Martin Wheatley’s comments came in a letter dated 11 December 2013 to Sajid Javid.
- StepChange Debt Charity’s response to the FCA’s consultation on its detailed proposals for regulating consumer credit (including payday lenders) is available on our website.
- The FCA takes over responsibility for regulating payday lending on 1 April 2014