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Monday, July 29, 2013

Backing the Archbishop

It always surprises me how it sometimes takes a celebrity publicly speaking out before a government policy starts to gain traction with the public.

As Richard Kemp points out here, the UK Government is already taking action to try and counter the insidious impact of pay day loan companies. I have quoted his article extensively below:

The current regulator OFT is in the midst of tough enforcement and compliance activity. Since March, OFT have sent compliance letters to each of the 50 leading payday lenders they reviewed (which together account for 90% of the market). Of the 21 that have responded so far, six have left the payday market – two surrendered their licences upon receiving letters and four have ceased to provide payday loans. The remaining lenders have 12 weeks from receipt of their letters to prove their compliance. If the OFT still have concerns upon receipt of the responses from lenders, they will consider taking further enforcement action. This can include taking steps to remove the lenders’ licence, impose legal requirements on them to change their behaviour or, if the OFT have evidence of imminent harm to consumers, suspend their licence immediately. In addition to these 50 lenders, the OFT has revoked the licences of three other payday lenders and another has surrendered its licence since March.

OFT have also just referred the entire payday lending market to the Competition Commission, on the grounds that there are fundamental problems with the way the payday market works. The Competition Commission has far reaching powers that could fix these problems if they decide to and the Financial Conduct Authority (FCA) will work closely with them. The FCA is the successor body to the Financial Services Authority and will take on responsibility for regulating consumer credit from April 2014.

The FCA has committed to prioritise action on payday lending right from April 2014. This includes looking at turning OFT guidance on payday lending into FCA rules which will be subject to more stringent enforcement and compliance action from April 2014. The FCA are also considering whether new, additional rules on payday lending are necessary from April 2014. BIS have commissioned research on payday lending advertising to help develop Government’s understanding of the impact it has on consumer behaviour and to help inform FCA’s thinking as they look towards regulation of this sector. The FCA will be setting out their thinking on new rules in September in a consultation.

Government has just held, on 1st July, a payday lending summit to take stock of where we have got to since March, and to consider what still needs to be done collectively to address outstanding concerns. This included consideration of what measures the FCA could introduce to reduce consumer harm in the industry when they become the regulator in 2014. At the summit, we also launched two new surveys – a consumer survey and a business survey to check how well the payday industry is meeting the standards set out in the voluntary codes implemented by industry last November.
Government is also supporting the provision of alternatives to payday loans. We have committed investment of up to £38 million in credit unions – to increase access to affordable credit for at least 1 million more people and save consumers up to £1 billion in loan repayments by March 2013. We are also raising the maximum interest rate credit unions can charge per calendar month from 2% to 3%, coming into force on 1 April 2014. This should reduce losses on loans, increase stability and improve consumer access to affordable credit. Further, in January 2012, the Government brought a Legislative Reform Order into effect, to improve the environment in which credit unions operate. In addition, we have worked with the FCA to transfer the regulation of Northern Ireland credit unions to the FCA from 31 March 2012. This means Northern Ireland credit union depositors will be protected by the Financial Services Compensation.

Yet none of this appears to have gained any traction with the public, until the Archbishop of Canterbury spoke up about the issue and then suffered his own minor embarrassment around the Church's investment in Wonga.

Now, as the Independent reports Vince Cable and Jo Swinson, the Consumer Affairs Minister, will meet the Most Rev Justin Welby next week to discuss how the Government can help the Church of England to widen access to the 500 not-for-profit financial co-operatives who make small loans to their members.  This is an extension of the Government's initiatives and shows how taking opportunities as they arise to work in partnership can enhance existing work.

It does not matter of course who gets the credit for this, just that we get it done. There is still a long way to go to protect the financially excluded from predators touting unsustainable high interest loans but it seems that we are at last, on the right track.

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