Which? response to Financial Conduct Authority payday lenders debt collection review

Richard Lloyd, Which? executive director said:

“The payday market is dogged by poor practice and we know borrowers in difficulty are not always treated fairly. This review is another encouraging sign the FCA is showing it means business and won’t tolerate unscrupulous lenders.

“We’d like to see a ban on excessive fees and charges when borrowers default which can be as high as £30. These charges should reflect lenders actual costs.”

Notes to Editors

Which? has called for payday lenders to cut the level of their default fees after we found ten of 17 leading payday lenders we looked at have default fees of £20 or more, and four charged £25 and above, with Wonga topping the table at £30.

Which?’s Clean Up Credit campaign has set out five ways the FCA should act to clean up the whole of the credit market and send a clear message to irresponsible lenders:

  •  Ban excessive default fees and charges – the FCA should require that the level of default charges should reflect lenders’ actual costs, and there should be a cap on the total amount of default charges.
  • Crack down on irresponsible lending – the FCA should enforce strong rules on affordability checks that properly take into account a borrower’s income, expenditure and ability to repay the debt, including any outstanding credit commitments.
  • Put people in control of their credit – end unsolicited increases in credit limits, unauthorised overdrafts should be opt-in only and there must be a limit to the number of times high-cost loans can be rolled over.
  • Clear and transparent information – the cost of credit and all fees and charges should be transparent, and for high-cost credit should be displayed clearly as pounds per £100 borrowed over 30 days. Credit products should come with clear health warnings explaining the consequences of missed payments.
  • Swift and early intervention for people in financial difficulty – the FCA should force lenders to freeze charges for borrowers in difficulty, and prevent them from charging interest on high-cost loans beyond 30 days after borrowers default. Lenders must help borrowers in difficulty and refer them to free independent debt advice.


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