Payday Lenders Fight Back Against FCA Oversight
Earlier this year, on April 1, the United Kingdom’s (UK) Financial Conduct Authority (FCA) gained oversight and regulatory control over the consumer credit industry. Even prior to the FCA’s expanded authority, industry stakeholders anticipated the agency’s rumored crack down on the payday lending industry. Although reforms have not yet been implemented, the FCA plans to restrict payday loan interest rates, terms and fees.
The payday lending industry has already shrunk considerably in anticipation of the regulations. The remaining payday lenders are vocally opposing the FCA’s proposed restrictions, arguing that industry reforms will unnecessarily constrict short-term credit harming consumers.
The UK’s Consumer Finance Association (CFA) recently published a study examining the experiences of consumers that were denied payday loans. Out of the 720 consumers that were declined by payday lenders in the survey, only 27 percent reported being “better off than they would have been with a short-term loan.” One-third of consumers considered using an “illegal lender,” and four percent decided to actually use illegal sources of funding. Only two percent of those surveyed sought funding from a more legitimate credit union.
While it is not clear how impactful the CFA’s survey will be, it does appear that the remaining payday lenders are prepared to stand up to the FCA’s reforms while they are still in the planning stage.