The consumer credit industry is quickly expanding in the United Kingdom and is therefore under the microscope of regulators, namely the Financial Conduct Authority (FCA). One of the most prominent among these growing ranks is that of the payday lender and, in correlation, the FCA is going to be closely monitoring these lenders for unfair practices.

The business model of the payday lender is fairly straightforward – in exchange for loans from these businesses, consumers must accept both high costs and short terms. It is not particularly surprising that the potential for unfair practices is ripe under these conditions. As such, the FCA will be cracking down on these consumer credit providers starting in April of 2014, when the responsibility of regulating the industry transfers from the Office of Fair Trading (OFT) to to the FCA. At that time, approximately 50,000 firms will be required to comply with new consumer protection regulations. These new rules and guidance will revolve around the core principle of transparency. More specifically, they will address misleading advertising along with the provision of advice. There will also be limitations on the use of continuous payment authorities. This proposal entails that payday lenders will be limited in the amount of times they can access payments from a customer’s bank account. This will help to alleviate the degree of control they hold over customers’ finances while enabling customers to maintain some independence and flexibility.

Overall, the Chancellor of the Exchequer has gone on to insist that a cap be placed on the exorbitant costs and burdens incurred by the borrower in such transactions. Ideally, the new oversight powers and rules for the FCA will equip it with effective enforcement tools and mechanisms to ensure the protection of consumer interests.

Source: Financial Conduct Authority – Consumer Credit