Which? response to the Government-led summit on payday loans

Responding to the announcement of a Government-led summit on payday loans, Which? executive director, Richard Lloyd, said:

“It’s high time there was a crackdown on irresponsible lending, so we’re pleased to see the Government putting payday loans firmly on the agenda.

“Many households are increasingly reliant on payday loans to pay for essentials or clear existing debts. The Financial Conduct Authority takes over regulation of consumer credit next year providing a unique opportunity to clean up this market. Now is the ideal time to assess whether the FCA has the powers it needs.

“In the meantime, the OFT need to stand firm on moves to improve this market and clamp down on payday lenders who break the rules.”

Notes to editors:

Which? has set out five ways the FCA should act to clean up credit and send a clear message to irresponsible lenders:

  1.  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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.


The latest information and research on consumer credit and spending can be found on the Which? Consumer Insight Tracker http://consumerinsight.which.co.uk/

Which? has consumer advice regarding payday loans on its website: www.which.co.uk/consumer-rights/search/?q=payday

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