Payday Loans: Firms Face Tougher Ad Rules

Written By Unknown on Rabu, 06 Maret 2013 | 14.43

Payday loans firms are facing tighter advertising rules as the Government tries to ensure that companies do not take advantage of people drowning in debt.

The plans include limiting the number of adverts firms are allowed to put out per hour, the times they can advertise and forcing them to make sure that interest rates are clearly displayed.

The Government will work with the Advertising Standards Authority and the industry to make sure advertising does not tempt consumers into taking out payday loans that they cannot afford.

The clampdown emerged as the Office of Fair Trading (OFT) prepares to publish the results of a wide-ranging probe into the payday lending industry later.

The OFT has carried out spot checks of 50 major lenders and obtained information from all 240 lenders in the market.

The regulator said in its interim report last autumn that formal investigations have been launched into several firms over their debt collection methods.

Charities have reported rocketing numbers of complaints about payday lenders from borrowers.

The Money Advice Trust (MAT) recently said that complaints about payday loans have doubled year-on-year to reach a record of 20,000 across 2012.

The charity warned that "something is drastically wrong" with the way that expensive loans are being dished out to people who cannot afford them, with lenders often rolling over loans.

New regulator the Financial Conduct Authority (FCA), which will oversee the consumer credit market from next year, will prioritise tighter rules on payday lending that could come into effect from April 2014.

The FCA's rules will be binding and if they are broken the regulator will have tough enforcement powers including imposing unlimited fines and the ability to claw consumers' money back.

The Government is also planning to do more to encourage greater communication within the industry to stop consumers taking out multiple loans from different lenders.

Sajid Javid, Economic Secretary to the Treasury, said: "The Government is introducing a fundamentally new approach to regulating consumer credit, which will ensure that irresponsible firms and bad practice will have no place in the consumer credit marketplace.

"Consumers can have greater confidence that the new FCA will intervene early and decisively in their interests - thanks to its more focused remit, objectives and powers."


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