As the Business, Innovation and Skills (BIS) Committee today publishes a report into debt management, specifically looking at payday loans and commercial debt management companies*, Which? chief executive, Peter Vicary-Smith, says:
“Which? has regularly highlighted the shortcomings of the debt management and pay loans industries and has been calling for better regulation of these markets for some time. This report shows yet again why it’s vital that the new financial regulator is a strong, open and proactive watchdog that works in the interests of consumers, and not industry.”
On the regulation of Consumer Debt
“In order for this market to function effectively, the Government must go ahead with its plans to move regulation of consumer credit to the Financial Conduct Authority. The regulator needs to use these new powers to encourage responsible lending, but it must also be given the power to protect consumers by banning harmful products.”
On payday loans
“Which? found widespread poor practice in the payday loans market when we investigated it last year**, and so the existing regulator, the Office of Fair Trading, must take tough action and deal firmly with any payday lenders that it finds breaking the rules.”
On debt management companies
“Which? research uncovered several debt management companies charging initial fees for advice, equivalent to around two months’ worth of repayments. We want to see these expensive upfront fees stopped. We advise anyone with financial problems never to use fee-charging debt management companies, and to seek help from debt advice charities instead.”
Notes to Editor
* The BIS report highlights shortcomings and areas of concern with regards to the Debt Management industry and makes recommendations for future Government action.
** Which? Money researchers investigated the eight biggest online payday loan providers by 12-week UK Google click-through rate for the search term ‘payday loan’.