MPs increase the pressure on payday lenders
- Author: Gillian Guy, Chief Executive
As evidence of the financial misery caused by payday lenders has mounted, the urgent need to end the excesses of the industry has risen rapidly up the political agenda. On Tuesday, I gave evidence to a committee of MPs on this vital issue.
After comparing baby pictures in the waiting room I sat down alongside MoneySavingExpert Martin Lewis, Peter Tutton from StepChange and Richard Lloyd from Which? to help the Committee with their investigation into payday loans.
I was able to tell MPs about the harm we see; loans given to people that can’t afford them, people pressured into extending or rolling-over their loan and people having their bank accounts raided by lenders using continuous payment authorities (CPAs).
One of the areas that came up repeatedly was payday lenders’ advertising. At Citizens Advice we have been campaigning for tighter rules on advertising and are calling for people to report irresponsible adverts to the Advertising Standards Authority.
It strikes me that the payday lenders’ advertising is a lot like the adverts we used to see for cigarettes: they present a sophisticated and alluring portrayal of a product which can be extremely harmful, as well as making the idea of using them seem normal. I want to see a severe health warning on all payday lending advertising to help puncture the cynical myths they peddle.
The Business Innovation and Skills (BIS) Select Committee also took evidence from a number of payday lenders and trade bodies earlier in the day. From what they had to say it seems that they still simply do not understand the effect they have on many of their customers.
However, there is a reason for some optimism. The Financial Conduct Authority (FCA) will take over regulation of payday lending next year and we expect they will be a far more effective regulator than the Office of Fair Trading has been. It is likely many of the worst payday lenders will just give up and leave the market rather than try to get through the FCA’s authorisation process. Those remaining will have to meet some stringent new rules on affordability assessments, roll-overs and the use of CPAs.
With the forthcoming regulatory change and the political heat being turned up by the likes of the BIS Select Committee, it seems unlikely that payday lenders will be able to carry on ripping people off indefinitely.
The challenge now is to keep the pressure up and make sure the new regulatory watchdog has the teeth to take on the payday lenders.