The FCA is to kick-start its new consumer credit regime with an in-depth thematic review into payday lenders’ debt collection practices.
The regulator is taking over regulation of the consumer credit sector from the Office of Fair Trading on 1 April.
It says on day one of the regime it will begin a review into the way payday lenders and other high-cost, short-term lenders collect debts and treat borrowers in arrears.
This will include how firms communicate, how they propose to help borrowers regain control of their debt, and how sympathetic they are to borrowers’ individual circumstances.
The FCA says it will also take a close look at the culture of each firm to see whether it is truly focused on the customer.
FCA chief executive Martin Wheatley says: “There will be no place in an FCA-regulated consumer credit market for payday lenders that only care about making a fast buck.”
He adds: “One in three payday loans go unpaid or are repaid late so we will be looking specifically at how firms treat customers struggling with repayments.
“These are often the people that struggle to make ends meet day to day so we would expect them to be treated with sensitivity, yet some of the practices we have seen don’t do this.”
Around 50,000 consumer credit firms are expected to come under the FCA’s remit on 1 April, of which around 200 will be payday lenders.
Payday lenders will be one of the groups that have to seek full FCA authorisation first and the regulator says it expects a quarter will decide they cannot meet its standards and leave the market.
From 1 April, the regulator says it will also visit the biggest payday lenders to analyse their business models and culture.
It will also assess the financial promotions of payday lenders and says it will move quickly to ban any that are misleading or downplay the risks of taking out a high-cost loan, as well as take on a number of investigations from the OFT.
Last month the FCA confirmed the final rules that will govern the consumer credit market and announced it will consult on a cap on payday loan charges this summer.