Payday Loans To Be Capped By Government

The cost of payday loans will be capped under new laws, the Government has announced.

The industry has been criticised over the affordability of the loans and the way they are marketed, with critics claiming the firms take advantage of vulnerable people.

The Competition Commission is currently investigating the industry and an Office for Fair Trading (OFT) report in September said there were "deep-rooted" problems in the way the loan companies operate.

New financial regulator the Financial Conduct Authority (FCA) will now be forced by the Government to cap the loans.

A Treasury spokesman said: "The Government has always kept the case for a cap under review as the market has evolved. 

The Labour leader has also heavily criticised the industry

"With growing evidence in support of a cap and emerging lessons from other countries - especially the cap on costs introduced in Australia this year - the Government believes it is right to use the opportunity of this legislation for Parliament to be clear on its intention."

The Government will amend the Banking Reform Bill currently going through Parliament to formally establish the cap.

Labour leader Ed Miliband has also spoken out over what he called the "Wonga economy".

Earlier this month he said payday loan companies were "running riot through our communities".

"They are responsible for a quiet crisis of thousands of families trapped in unpayable debt," said Mr Miliband.

The payday loan industry is worth £2bn

Mr Miliband has also called for a ban on payday advertisements during children's television shows, accusing the companies of using "cartoon characters, trendy puppets or cute plasticine figures" to attract children.

The Competition Commission investigation into the £2bn industry is due to reveal its findings next year.

It will be looking at claims that firms are emphasising the speed of the loan over cost and are "skimping" on affordability checks.

There have also been complaints of payday firms unexpectedly draining people's bank accounts through a type of recurring payment called a continuous payment authority.

The Financial Conduct Authority, which will take over regulation of consumer credit from the Office of Fair Trading (OFT) in April 2014, was already considering new controls before today's announcement.

Critics claim affordability checks are not being properly carried out

Among its proposals are unlimited fines, limiting to two the number of times a payday loan can be rolled-over and compulsory affordability checks for all applicants.

Bosses of three payday loan companies, Wonga, QuickQuid and Mr Lender, defended their industry when they appeared in front of MPs earlier in November.

Henry Raine, head of regulatory and public affairs at Wonga, told the Business, Innovation and Skills Select Committee: "Wonga's business is aiming to lend to people who can pay us back, that's how we make money.

"The vast majority of people pay us back on time. We freeze interest after 60 days and 25% of people pay us back early."

Mr Raine said around 3% of loans, equating to around 40,000 of Wonga's 1.25 million customers, go to the 60-day period.

Payday loan bosses defended their business in front of MPs

He said Wonga's record compared favourably with the rest of the loan industry, including credit card companies and banks.

The company also made a film telling the stories of 12 of its customers.

Wonga's chief operating officer told Sky News the film was made because "the silent majority of people using our service was not being heard".

He added: "Generally you hear a lot of criticism about our service out in the media and actually the super positive stories that we see every day from our customer feedback are not being heard, so we wanted to redress that balance and allow their voice to come out."

Anda sedang membaca artikel tentang

Payday Loans To Be Capped By Government

Dengan url

http://raskindollar.blogspot.com/2013/11/payday-loans-to-be-capped-by-government.html

Anda boleh menyebar luaskannya atau mengcopy paste-nya

Payday Loans To Be Capped By Government

namun jangan lupa untuk meletakkan link

Payday Loans To Be Capped By Government

sebagai sumbernya