Melly Abruzz writes: On April 1, 2014, the regulations governing payday lenders in the UK was transferred from the Office of Fair Trade (OFT) to the Financial Conduct Authority (FCA). The gist of the regulatory shift was that payday lenders are now obligated to conduct thorough affordability and credit checks. Other changes include a cap in loan rollover, and pointing borrowers in the direction of free debt advice.

This is a stark contrast to previous practices, where payday lenders would provide loans to essentially any customer, irrespective of that customer’s ability to pay back the loan. Customers’ inability to pay back the loans resulted in them entering a never-ending spiral of continuous payday loan rollovers and additional loans that experienced increases in interest and accrued additional fees.

The upshot of the regulatory changes mean that the industry experienced a mass exit. Many of the older payday lenders left the business, unable to continue their lending methods under the new regulations. Lenders who had dominated the market for years (for example, Cheque Centre, Tooth Fairy Finance, MCO Capital, Speed Loans, and Donegal Finance) were shut down by the OFT and FCA. Others simply took down their websites and signed off from the industry.

In an unsurprising balancing act, the payday industry also had a massive influx of new payday lenders determined to continue loaning with the added criteria. New payday lenders (such as Cash Float and https://www.cashinarush.co.uk/) have explicit statements on the fees that can be accrued if payday loans aren’t repaid on time, as well as visible links to free debt advice, per the FCA’s regulations.

Hopefully this trend indicates a positive direction for the FCA in its efforts to deal with predatory lending issues, and long-term reforms for the so-called “poverty industry”.

By Melly Abruzzo

© 2014 Melly Abruzzo - All Rights Reserved

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