CCR Interactive 2012

Welcome to April's edition of CCR.

The payday lending sector remains one of the most controversial parts of the credit industry. All too often lenders are labelled as vultures preying on the poor and needy, but, from my point of view, I continue to see an ever-increasing number of credit professionals going to work each day with the honest aim of providing a much needed service in a modern and successful way.

Of course, nobody would argue that the sector is entirely without its rogue elements and so we should all be pleased by Office of Fair Trading’s (OFT) continued interest. Last month it gave 50 payday lenders, accounting for 90% of the payday market, 12 weeks to change their business practices or risk losing their licences.

The OFT also announced that, subject to consultation, it would refer the payday lending market to the Competition Commission after it “found evidence of deep-rooted problems in how lenders competed with each other”.

These actions were announced in the final report on the OFT’s compliance review of the £2bn payday lending sector. Particular areas of non-compliance included: failing to conduct adequate assessments of affordability before lending or before rolling over loans; failing to explain adequately how payments would be collected; using aggressive debt collection practices; and not treating borrowers in financial difficulty with forbearance.

Russell Hamblin-Boone, chief executive of lender trade body the Consumer Finance Association was eager to show his support: “We recognise there are concerns about the industry, however, these reports are a snapshot in time and work is already underway. Since the industry was investigated, last year, we have introduced a series of safeguards to ensure that our members are dealing with customers responsibly. We have raised standards all the way. We go far beyond the legal requirements but if the government wants us to do more, we will consider its proposals.”

He highlighted that their code of conduct already requires advanced affordability assessments, limits the number of rollovers to a maximum of three, and requires lenders to safeguard the protection of consumers in financial difficulty.

Meanwhile, Frances Coulson, council member of insolvency practitioners trade body R3, turned the spotlight on the important work that still needs to be done: “If used in the right way, to fill a genuine one-off gap in finances, a payday loan does have a place. However they are increasingly being taken on as a debt solution instead of a temporary financial solution. R3’s own research revealed one in three borrowers could not pay off the first payday loan so have had to take out another one, which potentially causes individuals to spiral into serious debt problems.

“As the payday loan industry has grown, so have concerns about debt. There has been a vast increase in the number of individuals seeking debt advice from insolvency practitioners and debt charities as a result of payday loan trouble.”

Whatever the current situation, the requirement is clear: the industry needs to continue to drive towards quality, with both regulation and codes of practice having a part to play. Every business sector matures and payday lending will be no different, as it continue to evolve within the glare of regulatory and media scrutiny.

Enjoy the magazine!


Stephen Kiely

Editor