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Consumer minister Jo Swinson has called a summit to investigate if greater regulation is needed to control payday lenders.
The industry is currently under the remit of the Office of Fair Trading, who is set to hand control over to the FCA next year. In March of this year the OFT proposed referring payday lenders to the Competition Commission believing there to be: ‘evidence of deep-rooted problems in how lenders compete with each other’.
They also accused lenders of:
Swinson has invited payday loan companies, financial regulators, debt charities to the meeting. Among the topics being discussed it is expected that the powers the FCA will have when they take over regulation next year will feature high on the agenda. In an interview with the BBC she said: “We must make sure the FCA rules are robust and strong and what is needed to stamp out the rogue and irresponsible behaviour of some parts of the industry.”
The head of the FCA, Martin Wheatley, wants to come down hard on companies that carry out abusive practices. According to Citizens Advice, 87% of people who took out a payday loan were not asked to prove that they could pay it back. This becomes worrying when interest rates can exceed 5,000%, the largest lender, Wonga, quotes rates as high as 5,853%.
Richard Lloyd, executive director at Which?, said: “It’s high time there was a crackdown on irresponsible lending, so we’re pleased to see the Government putting payday loans firmly on the agenda.”
Among those confirmed to attend are OFT, Which?, and the Consumer Finance Association. The other side of the house was left feeling slightly ignore, Stella Creasy, Labour MP and long-time critic of payday loan companies, tweeted Swinson asking: “Your payday lending summit looks interesting – can I come?”