Following the Financial Services Authority’s rebrand as the Financial Conduct Authority and takeover of the regulation of payday lenders at the beginning of April, the new regulator has claimed its first scalp in the battle to enable “consumers to use financial services with confidence.” Their first victim is payday lender Cheque Centre, which has agreed to exit the market following an investigation into their practices.
Cheque Centre will stop issuing single instalment payday loans, and will also halt its debt collection activities until it demonstrates to the FCA that improvements have been made.
The Government has been under increasing pressure to tackle payday lenders, which have been labelled “legal loansharks” by consumer rights groups and MPs alike. These lenders offer short-term loans at very high interest rates, and have been criticised for overzealous debt collection from late-paying customers.
The ruling is being seen as a shot across the bows of other payday lenders, including market leader Wonga. Martin Wheatley, the FCA’s chief executive, said:
“This is an early victory for people that use payday lenders. We made our tougher expectations clear to Cheque Centre and they have wasted no time in making changes. I have said before that firms would need to dramatically improve their operation or exit the market, and we are now seeing that happening.
“This is an important step in the right direction and other payday lenders should take note.”
As part of the agreement Cheque Centre has agreed to rework its procedures to be in line with FCA rules, and retrain staff “to instil a customer-comes-first culture.”
Photo by Bryan Mills