Payday lenders face a crackdown after concern about exploitation of vulnerable people – but a Sheffield MP believes the changes do not go far enough.
Proposed changes are set to be introduced next April by regulator the Financial Conduct Authority.
Under the plans, payday lenders will be forced to carry out affordability checks and will only be able to roll over loans twice.
Restrictions will also be placed on the number of recurring payments payday firms are allowed to collect after complaints they are unexpectedly draining borrowers’ bank accounts of cash. And the FCA has promised to ban any adverts that are misleading.
But Sheffield Central Labour MP Paul Blomfield, who is campaigning against high interest charges levied by payday lenders, said: “I’m pleased that the FCA has recognised the issues that I was raising in my High Cost Credit Bill, but their proposals don’t go far enough.
“We need tougher controls on payday advertising – with clear ‘health warnings’ and signposts to free debt advice on all adverts.”
Mr Blomfield wants affordability checks, lending limits and for borrowers to be told in advance of any attempt by a payday lender to access their bank account.
Debt advice would be funded by a levy on the sector, the MP added.
Under the FCA’s proposals, payday firms will only be able to make two attempts to use a type of recurring payment called a continuous payment authority to have a loan paid off.
Information on where to get free help with debts must be given to every borrower who rolls over a loan and ‘clear risk warnings’ must be displayed on all adverts and promotions along with details of debt advice.
Martin Wheatley, the FCA’s chief executive, said while payday lending ‘has a place’, loans must only be offered to those who can afford them. “Tougher regulation is coming,” he said.