Many payday lenders still failing borrowers, says FCA
Too many payday lenders are still failing to be fair to customers who have fallen into arrears, according to the Financial Conduct Authority (FCA).
The regulator found "serious non-compliance and unfair practices" in all the firms it examined.
In a few cases, it found that some customers were being pursued by collection agents, contrary to the rules.
However, the FCA also said that many firms had improved their behaviour.
A spokesman for the payday lenders themselves also said that many of them were "on a clear path of improvement".
As part of its ongoing investigation, the FCA found that some lenders were:
- failing to recognise customers in difficulty
- not directing people to free debt advice
- failing to investigate customer complaints
- engaging in misleading practices to get payments from customers
- wrongly adding fees and charges to bills
In the case of three particular lenders, customers who had fallen behind with payments had shown medical evidence of why they could not pay.
The rules say that such customers should be given a breathing space, if they are working with a debt advisor.
But the FCA discovered that some such borrowers were still being pursued by debt collectors.
It said that in some cases they suffered "serious detriment and financial loss" as a result.
The FCA has not named the companies involved.
Meanwhile, the industry has defended its record.
"Short-term lenders are on a clear path of improvement, with the worst lenders leaving the market," said Russell Hamblin-Boon, chief executive of the Consumer Finance Association.
However, the FCA said more work needed to be done to protect people who fall behind with payments.
"Our rules are designed to ensure loans are affordable; that customers who get into difficulty are treated fairly and that they are not pressurised into unaffordable and unsustainable repayment plans," said Tracey McDermott, director of supervision and authorisations at the FCA.
She added that the real test for payday lenders will come when the FCA considers which firms will get full authorisation.
To continue in the market, lenders had to apply for authorisation by the end of February.
The FCA will consider which firms will be allowed to continue lending over the next few months.
A new set of rules capping loan charges came in at the beginning of 2015.
Payday loan rates are capped at 0.8% per day of the amount borrowed, and no-one has to pay back more than twice the amount they borrowed.