Payday lenders are flouting the rules they agreed last year to better protect their customers, new research has found.
A survey of consumers by the Department for Business, Innovation and Skills found a majority did not have the process explained correctly to them:
- Nearly a quarter of consumers surveyed said their were pressurised into extending their loan, and half said lenders did not fully explain the consequences of extending
- More than 60% said lenders did not check to see if they could afford to roll their loan over
- Nearly one in three people said a payment called a "continuous payment authority" was not explained to them
- Almost three-fifths of people said they were not told how to cancel these recurring payments.
Consumer Minister Jo Swinson said it was clear the industry had failed to self-regulate. She said:
We warned the industry months ago that if it didn't get its house in order we would step in. Now the FCA has come out today and published strong actions which will tackle the problems the market has failed to address.
Too many people are being offered payday loans too easily and without really understanding the dangers if they can't afford to pay the money back.
The FCA will take on new powers to ban adverts however there will be no new rules governing the interest rates charged by the companies.
New rules on the way for lenders in how they grant loans and demand payments, but no changes to the interest rates or fees they can charge.