FCA urged to extend payday loan fee cap to other forms of credit | Payday loans

The city watchdog faces increasing pressure to extend its cap on payday loan fees and interest to a wider range of high-cost financial products ahead of a major review of lending practices this week.

Charities and politicians urge the Financial Conduct Authority (FCA) to take decisive action on Thursday when it releases the findings of an 18-month review of bank overdrafts, home loans, catalog credit and hire purchase loans.

Likely to result in a series of new rules for banks and financial firms, the review comes as struggling Britons increase personal borrowing to levels not seen since the financial crisis.

Hollywood actor Michael Sheen started campaigning against high cost credit providers, while soaring debt levels fueled fears at the Bank of England about the return of reckless lending.

FCA chief Andrew Bailey previously said a cap similar to that used for payday loans was “on the table” under the scrutiny of high-cost credit. However, charities fear that the regulator will continue to use the tool, which would prevent consumers from repaying more fees and interest than the amount borrowed.

Damon Gibbons, director of the Center for Responsible Credit and who worked with Sheen on the actor’s campaign, said the FCA had a golden opportunity to “grab the nettle” of high-cost credit.

“If they don’t tackle the injustice of collecting the highest burdens on the poorest borrowers, then surely parliament will have to step in again and force the FCA to use its powers properly,” he said. he declares.

Labor MP Stella creasy, credited with forcing the Treasury to introduce controls on payday companies such as Wonga and Money Shop four years ago, said the financial sector had “shifted” to bypass the cap.

Some credit card companies, such as Aqua and Vanquis, specialize in lending to poorer customers with low credit scores and may set their annual interest rates around 60%, which is more than triple of the average rate indicated for the product.

“They turn into different forms of high cost credit but the consequences are always the same. Even when consumers do the right thing, they still get bitten by these companies, ”she said.

Rachel Reeves, Labor chair of the corporate select committee, said: “It is unacceptable that home lenders and providers of rental goods with option to buy are allowed to blatantly exploit people they know are vulnerable. By charging exorbitant interest rates and fees, they only make people’s financial problems worse. FCA must take urgent action to prevent unscrupulous suppliers from creating more misery. “

Gillian Guy, Managing Director of Citizens Advice, said: “People who use purchase option rental loans and home equity loans are unfortunately not protected against uncontrollable costs.

“Our research shows that a cap on these loans would save £ 185million and help keep debt from spiraling out of control. The cap on payday loans has been a remarkable success and has led to a dramatic reduction in the number of people we see with problematic debts related to these loans. “

Debt charity StepChange estimates that 1.4 million people used high-cost credit last year to cover essential living costs. Adam Butler, the charity’s leading public policy advocate, said: “We urge the FCA to take strong and decisive action to reduce the damage caused by high-cost credit. “

The demands for action come as Citizens Advice estimates up to £ 123million would be saved by consumers if the cap were extended to home loans, while another £ 62million saving would go to borrowers using rental products with option to buy.

Last week, 84 MPs and the Which? called on the FCA to take urgent action to curb unplanned overdraft fees, after finding that main street banks are able to charge seven times as much as payday loan companies.

An FCA spokesperson said: “The FCA does not comment on speculation. The full document will be released on May 31.

About Walter J. Leslie

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