Loan practices ‘still unacceptable’

Published: Tuesday 10th March 2015 by The News Editor

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Payday loan customers are still facing “u nacceptable practices” despite the recent clampdown on the industry, the watchdog revealed today.

The Financial Conduct Authority (FCA) has been encouraged by the steps being taken by many firms to improve behaviour but said that its research found many customers in arrears were still being treated unfairly.

It noted that people were not being directed to free debt advice and firms were guilty of offering struggling consumers inflexible repayment options.

The FCA said it found serious non-compliance and unfair practices in all firms that it reviewed, leading to poor outcomes for many customers and, in some cases, serious detriment and financial loss.

Reviews of three firms revealed a backlog of letters and documentation, including from vulnerable customers who had fallen behind in repayments.

This documentation included medical evidence and letters from debt advisers providing crucial information about why some customers were failing to pay.

On further investigation, it was revealed that some of these customers were still being pursued by collection agents.

Firms are required to give customers “breathing space” from collection activity if they provide evidence that they are working with a debt adviser to manage their debts.

Tracey McDermott, director of supervision and authorisations at the FCA, said: “Our rules are designed to ensure loans are affordable, that customers who get into difficulty are treated fairly, and that they are not pressurised into unaffordable and unsustainable repayment plans.

“This segment of the industry has, for too long, been in the spotlight for the wrong reasons. It is essential that the more customer-focused approach we have started to see is maintained and embedded as we go forward.”

She said the real test for lenders will be the FCA authorisation process where they will have to demonstrate how much progress they have made if they want to remain in the market.

New rules launched this year by the FCA have capped the fees and interest imposed by lenders in an effort to stop debts spiralling out of control.

Published: Tuesday 10th March 2015 by The News Editor

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