LONDON Feb 28 Britain's financial watchdog
unveiled a set of new rules to crack down on pay-day lenders on
Friday, responding to concerns it is not doing enough to
discipline an industry accused of preying on the country's
The Financial Conduct Authority said it would pay much
closer attention to the 50,000 UK lenders offering short-term
loans intended to tide borrowers over until payday, and impose
swift fines on those not putting customers' interests first.
Britain's consumer credit market has boomed in recent years
as benefit cuts squeeze poor households' budgets and banks
reduce their lending. The UK's consumer credit market is now
worth 200 billion pounds ($333.42 billion).
But public criticism of the firms has also grown.
Politicians, poverty-focused charities and the Church of England
say they are worried that the conditions of these loans - one of
the biggest payday lenders, Wonga, charges an annual interest
rate of 5,853 percent - only tip poor households into more debt.
"Our new rules will help us to protect consumers and give us
strong new powers to tackle any firm found to be overstepping
the line," said FCA Chief Executive Martin Wheatley on Friday.
"We want to be sure that the market works well when people
need it - whether that's for one day, one month or longer."
The new rules mean lenders can only roll over a loan -
extend its term or replace it with a new one to pay an
outstanding balance - twice, and may only dip into a customer's
bank account or credit card twice to obtain payment after normal
collection has been unsuccessful, a practice known as continuous
Companies will also be required to give customers
information on how to get free debt advice.
However, the FCA came under fire for not going far enough
because it did not impose a cap on interest rates. The watchdog
said in October, when it first outlined its proposals, that a
cap could make it harder for people to borrow and push them into
the hands of loan sharks.
"We continue to see problems related to irresponsible
lending, spiralling debts and the unfair treatment of those in
financial difficulty and it remains unclear as to whether these
rules will truly fix these issues," said Peter Tutton, head of
policy at debt charity StepChange.
StepChange on Thursday said the number of people contacting
it seeking help with payday loans rose to 66,557 in 2013, up 82
percent on 2012.