Payday price cap - industry analysis
Paul Clark, CEO of Charter UK, the complaints management software provider, comments on the payday loan charges cap announced today by the Financial Conduct Authority (FCA):
“Payday lending in the UK has changed almost beyond recognition since the Financial Conduct Authority took over from the Office of Fair Trading in April. Whilst some people viewed this regulatory clampdown as an attempt to suffocate this controversial corner of the credit market, it should really be seen as drive for clarity instead.
The cap of 0.8% per day imposed by the FCA won’t close down the whole short term loans sector, but it will severely curtail the operations of some of the industry’s rogue elements, leaving only those lenders who subscribe to Treating Customers Fairly.
The short term credit market in the UK is worth two million, and that demand is unlikely to go away. Under this price cap, the demand will be funnelled through a process that ensures greater clarity and which helps customers understand the full consequences of their loan product.
Due to the high level of regulation now in place within the short term credit sector, and the speed with which these changes have come into place, a major challenge for the remaining lenders will be restructuring their businesses in a way that makes them transparent to their overseers. A streamlined system involving efficient people, systems and processes will be essential to making the relationship with the increasingly proactive regulator work.”