More regulations facing Payday lenders
With the new FCA regulations coming into force in January of this year now it would seem things may get even tougher for payday lenders with the industry’s advertising standards being addressed and new guidance being published.
It would seem the payday loan industry is never far away from a headline and the latest story to hit the headlines in early June 2015 is the new guidance rules for advertisements.
Interest rates have been capped, fixed default fees of no more than £15 have been enforced and a number of other rules put in place to stop companies leading people into a debt trap. With payday loans firms like Wizzcash rising to the challenge of these tough new FCA regulations by offering fair and transparent rates and a clear and intuitive website it would seem for others if it wasn’t tough enough, it could get a bit tougher.
Why have these guidelines been imposed?
Recent TV advertisements for payday lenders have come under scrutiny for featuring puppets and concerns are growing for those companies that may use light hearted and aspirational messages to entice people to take out a loan. The idea of people using payday loans to finance a holiday or a spending spree has led to this new guidance being published by the Broadcast Committee of Advertising Practice (Bcap) and only applies to television advertising. Payday lenders as with other firms have a responsibility to their audience and to society. By suggesting money could be borrowed to address other financial concerns or to encourage frivolous spending could be a serious breach of this responsibility. A further concern is how fast a loan could be obtained indicating that this is not a serious financial decision.
A further public consultation has been scheduled referring to the scheduling of TV ads for July 2015.
So what does this further regulation mean for the industry?
Like the new FCA rules this new guidance on advertising serves to protect the public from entering debt arrangements that they cannot afford and cannot repay only leading them further and further into a spiral of debt and despair. What this means is that payday loans will be advertised as a way to pay for unexpected bills like fixing the car or the boiler or maybe a leak in the bathroom. Let’s face it there are never a shortage of these types of bills when the household budgeting has already been done for the month. The guidance is about making the industry responsible for its actions and ensuring that payday lenders are being ethical and offering a fair service. There are of course those lenders (many of who have already shut up shop) that will not last the duration and then there will be other lenders like Wizzcash who will carry on operating within the guidelines and consistently looking to improve their products and services.
Category: Business and Politics
