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 , 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.
The Guardian explains how the , 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.