FCA grants authorisation to short term lenders

loan

The FCA took over from the Office of Fair Trading (OFT) and started regulating the high cost lending market in April 2014. Initially, all lenders and brokers were required to apply for temporary or ‘interim permission,’ with the opportunity to apply for ‘full permission’ to continue trading long-term.

Almost a year later, the FCA has now given full authorisation to those lenders that have met a series of minimum thresholds and for those running the business that are deemed fit and have demonstrated an understanding of the rules provided by the FCA.

Adam Freeman, CEO of Mr Lender, said upon receiving full authorisation: “This is the beginning of an exciting new chapter for us. We offer one of the most competitive loan products in our sector and we aim to keep raising the bar so that our customers benefit from the most responsible, affordable and transparent service.”

What this means for the payday loan industry

The payday loan sector is a £2 billion industry that has been heavily criticised in recent years by the press, politicians and religious figures.

The strict regulation imposed by the FCA since April 2014 has effectively kept the most compliant lenders in the game, whilst weeding out the least responsible.

Noticeably, there has been a stark disappearance of payday loan brokers that previously charged upfront fees for basic applications and profited from selling customer data to third party companies.

Thus, the number of customer complaints in the payday loan industry has decreased by 45 per cent, according to the Citizen’s Advice Bureau.

The Guardian explains how the industry has been cleaned up significantly, and this is due to rules being enforced upon lenders. Now, as lenders are granted authorisation, the real positive change has to come from within as lenders take the responsibility to change the reputation of a once criticised industry.

Other measures introduced by the FCA

The main regulatory measures enforced by the FCA include a price cap for all payday lenders, which is capped at 0.8 per cent per day, for every £100 borrowed. Customers are limited to two rollovers per loan and a one-off default fee that cannot exceed £15. All companies providing or comparing short term credit must provide a link to the MoneyAdviceService.org.uk on their website or any other marketing material.

The FCA is also responsible for regulating the logbook, peer to peer and guarantor loans sector too.