The Financial Conduct Authority is to kick-start its new consumer credit regime with a thematic review of payday lenders’ debt-collection practices.
The regulator is due to assume regulation of the consumer credit sector from the Office of Fair Trading on 1 April. It will then begin a review into the way payday lenders collect debts and treat borrowers in arrears, including how sympathetic they are to borrowers’ individual circumstances.
The FCA will also take a close look at the culture of each firm to see whether it is customer-focused.
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: “We would expect customers in arrears to be treated with sensitivity, yet some of the practices we have seen do not 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. The regulator expects a quarter of payday lenders to leave the market once they have to apply for full authorisation.
Page Russell director Tim Page says: “It makes sense for the FCA to be focusing on the treatment of borrowers in arrears because it has just completed a similar review of the mortgage market.”