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Govt agrees FCA should regulate payday lenders

Lord Sassoon
Lord Sassoon, House of Lords

The Government has caved in to cross-party demands to cap the cost of credit for payday lenders by amending the Financial Services bill.

Under the proposals the Financial Conduct Authority will have the power to cap the cost and duration of credit for short-term loans.

A Labour-led amendment proposed by Lord Mitchell and backed by Bishop Justin Welby, the next archbishop of Canterbury, meant the Government was facing defeat in the House of Lords.

Commercial secretary Lord Sassoon said: “We need to make sure the FCA grasps the nettle when it comes to payday lending and has specific powers to impose a cap on the cost of credit and ensure that the loan cannot be rolled over indefinitely should it decide, having considered the evidence, that this is the right solution.”

Lord Mitchell welcomed the Government’s moves and withdrew his amendment but warned it could be introduced later if the new rules are not tough enough.

He said: “This issue is now where it should be – beyond party politics. The most welcome winners are those who live in the hellhole of grinding debt. – their lives will become just a little easier. The losers are clearly the loan sharks and the payday lending companies. They have tried every trick in the book to keep this legislation from being approved and they have failed.”

At the Liberal Democrat annual conference in September, deputy chief whip Lord Dick Newby said the Government was prepared to regulate the sector if it did not abide by a tough new voluntary code.


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. It is at last about time the government took action against these companies is in my opinion there is little difference between these companies and illegal loan sharks. It only seems right that there should be some form of maximum interest rate imposed so that companies like this don’t rip off the most vulnerable in society.

  2. Do they contribute towards levies?

  3. I don’t like these payday loan things and I brought them and sale and buy back to the attention of my in 2006 as a concern.
    I think it is good that payday loans will now be regulated and so should log book loans.
    To be fair to the lender though, I think the APR in isolation should NOT be the only fee allowed. Interest should have a cap and there should also be a flat transaction fee, which would of course bump the APR up, but if the loan is continued/rolled over, then there should NOt be an additional transaction fee, just a change in the interest rate and hence the APR if the borrowing is then kept longer, should be requoted.

  4. Why not the MoJ, given the sterling job it seems to be doing regulating CMC’s?

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