Clampdown on payday lenders is welcomed
A clampdown on payday lenders which will see an end to firms giving loans the green light in ten minutes has been announced by the City regulator.
New curbs proposed by the Financial Conduct Authority (FCA) will also limit the number of attempts payday firms can make to claw money back out of a struggling borrower's bank account.
The lenders will be forced to place "risk warnings" on their promotions and advertising, urging consumers to "think" before taking on a payday loan. The watchdog has powers to ban adverts if it thinks they are misleading.
The proposed new rules, which will come into force next year, aim to combat soaring complaints about the £2 billion sector, which has doubled in size in the last few years and is used by an estimated two million customers.
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Payday lenders will have to carry out stricter checks to make sure that borrowers can afford to take loans out and they will only be able to roll a loan over twice, to stop consumers sinking into a spiral of debt.
FCA chief executive Martin Wheatley told Radio 4's Today programme: "The fact you can get a loan in ten minutes means the person lending to you isn't really doing the proper affordability checking."
The proposals were welcomed by consumer campaigners, although many questioned why tougher action has not come sooner. The new rules will not come into force until next April and breaches will not be enforced before October 1 next year to give firms time to adjust.
The plans were welcomed by the Archbishop of Canterbury, who sparked controversy recently after telling payday lender Wonga that the Church of England wants to "compete" it out of existence as part of plans to expand credit unions.