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UK payday lending: Regulation or simply self-regulation?
The UK payday lending industry has had enough time to demonstrate that it can provide responsible credit that is productive for both sides, it is now too late for the industry to say that it will regulate itself, UK ECRC partner CfRC calls for the government action all have been expecting.

The UK industry code of conduct are available below (see http://www.cfa-uk.co.uk/codeofpractice.asp ) but we are concerned by both the regulation and the enforcement of these rules therefore we ask the Government to ensure that the financial supervisor has the power to supervise these loans. Payday lending is a business model that is growing fast beyond the UK (see related post) and the EU regulators and supervisors need to reach a position on these loans and establish rules on these as soon as possible.

The OFT has removed a licence last week, these are the examples of sanctions that must be systematically imposed for breaches.

Payday lender loses its licence after OFT action
http://www.oft.gov.uk/news-and-updates/press/2013/23-13


Payday lending | Self regulation is not enough, we need Government action to protect consumers

Immediate Release: Monday 18th March 2013

The trade association for many of the larger payday lenders, the Consumer Finance Association ('CFA'), has announced that it will put a panel in place to monitor whether or not its members are complying with its code of practice.

The code, which was launched in July last year, also appears to have been amended to reduce the number of times that lenders roll over loans from three to one, and CFA members have also committed to providing people in financial difficulties with a repayment plan, involving the freezing of interest and fees.

Reports of the intention to establish a monitoring panel for the code quote the CFA's Chief Executive, Russell Hamblin-Boone, as saying:

"We are putting in a compliance regime around our code of practice, and appointing an independent panel who will oversee compliance visits by one of the big four accountancy firms."

The Centre for Responsible Credit ('CfRC'), which has previously criticised the CFA for failing to monitor compliance with its code of practice, called for further clarity concerning consumer representation on the panel and for it to be truly independent of the CFA, as well as to set out full details of the proposed auditing process. However, it also called on Government and the regulators to do more to protect consumers.
Responding to today's CFA announcement, CfRC Director, Damon Gibbons said:

"The Consumer Finance Association is waking up to the fact that its members can't be trusted to act responsibly. But, an industry sponsored 'monitoring panel' isn't the answer. We need a comprehensive solution such as exists in many parts of the U.S. We need the combination of a national database; clear limits on total borrowing relative to income, and price caps to stop people being ripped off. With debt advice agencies reporting an exponential rise in payday lending problems, warm words from the lenders is not enough. We need action from Government and the regulators and we need it urgently." 

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CFA Code of Practice

On 25 July 2012 the four main trade associations representing payday and short term lenders launched a new customer charter which sets out a series of new protections for customers. This Charter sits alongside our Code of Practice.

http://www.cfa-uk.co.uk/images/pdf.png

Click here for a copy of the Good Practice Customer Charter

http://www.cfa-uk.co.uk/images/pdf.png

Click here for full details of the Charter


The CFA's Code of Practice has been enhanced in line with the new Charter, and CFA members are currently working to implement these enhancements as early as possible in advance of the 26 November deadline agreed with the Government.

http://www.cfa-uk.co.uk/images/pdf.png

Click here for a copy of the CFA Lending Code for Small Cash Advances


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The Centre for Responsible Credit is a dedicated policy unit within the Cente for Economic and Social Inclusion established to monitor developments in the UK's credit markets and develop policy proposals for responsible lending to support sustainable economic growth.

The Centre has taken an active interest in the regulation of payday and high cost credit markets with reports on problems in this sector dating back to 2010. Our reports can be obtained from our website here.

Damon Gibbons is available for comment on 07961869473.


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OFT relevant Press releases 2013

2012

·  OFT advises price comparison websites how clearer information can improve consumer trust 23 November 2012
·  OFT warns payday lenders 20 November 2012
·  OFT calls for information about online personalised pricing practices 15 November 2012


ID: 48270
Publication date: 25/03/13
   
 

Created: 25/03/13. Last changed: 25/03/13.
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