Since the Financial Conduct Authority (FCA) took over regulation of the consumer credit market from the Office of Fair Trading (OFT) in 2014, the payday loans industry has undergone significant regulatory reform and has changed for the better: consumers have greater protection from unfair lending practices; the loan application process has become more comprehensive; and the penalties for non-compliance are much higher.
Thanks to new FCA payday loan regulations, the payday loans industry is now one of the most tightly regulated industries in the country – and at the heart of these changes is you, the consumer.
Changes to the industry
To improve the payday loans market, the FCA introduced new rules on affordability, roll-overs, advertising, and the use of recurring payments. It made its intent very clear by taking supervisory action in cases where firms breached its requirements.
Now, payday lenders must:
- Conduct comprehensive affordability checks on all borrowers to ensure they can afford the loan.
- Limit the number of loan roll-overs to two.
- Restrict the number of times a Continuous Payment Authority (CPA) can be used to two.
- Display clear risk warnings on all adverts and promotions, along with more information about debt advice.
The FCA also implemented three main changes to the price structure of short-term loans/credits to protect borrowers from unfair lending practices, which are:
- Reduce the maximum daily interest rate to 0.8% per day.
- Cap default fees at £15 to protect customers who struggle to pay back the loan and prevent them from getting further into debt.
- Cap the maximum total cost of a payday loan at 100% so customers will never have to pay interest that exceeds the loan amount.
The FCA payday loan regulations have brought in strict loan practices, but also produced healthy competition amongst payday lenders and improved consumer trust.
With the playing field levelled, payday lenders are engaging with potential customers through means other than the price of their loans – which is why customer service has taken on a new focus for payday lenders.
Customer service at the heart of businesses
As part of the FCA’s outcomes based regulatory and supervisory approach, all firms must be able to show consistently that fair treatment of customers is at the heart of their business model.
The Treating Customers Fairly (TCF) guidance is comprised of six principal outcomes:
- Customers can be confident that they are dealing with firms where fair treatment is central to the corporate culture.
- Product and services marketed and sold in the retail market are designed to meet the needs of the identified consumer groups and are targeted accordingly.
- Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.
- Where consumers receive advice, the advice is suitable and takes account of their circumstances.
- Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect.
- Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.
At Uncle Buck, our customers are at the heart of everything we do. We not only treat our customers fairly, but often go above and beyond to give them the support they need.
Our customers can expect to receive clear information around our services, high-quality support from our UK based customer support team, and fair, honest treatment regardless of their circumstances.
We always encourage our customers to repay what they owe in full – but also recognise that changes in circumstances may mean that they need additional time. In any case, we encourage our customers to get in touch with us at the earliest possible opportunity so that we can discuss the options available.
If you are considering a short-term payday loan, why not get in touch and see how we can help?