Consumer Credit

Example Email Correspondence

Dear Mr Watling,

I would like to bring to your attention the issue of payday lenders. You may have seen the story of Danny Cheetham on the BBC. Many different payday lenders offered him loans at sky-high interest even though they knew he was a gambling addict. His initial £100 loan spiralled into a debt of £19,000.

And yet the Financial Conduct Authority are asleep at the wheel. They are not enforcing their own rules on affordability that might have saved Danny and millions of others like him from becoming trapped by debt.

I am appalled by this. Please, can you make sure this never happens again? You can do something to help fix it. I?d like to ask you to write to the Economic Secretary to the Treasury, John Glen, and ask him to instruct the FCA to enforce their rules on affordability checks. Please let me know if you decide to do this.


My Reply

Thank you for contacting me about consumer credit.

The Financial Conduct Authority (FCA), has actually brought in tough new rules for payday lending. In 2015 the FCA decided to introduce a cap on the total cost of payday loans, not just the interest rate, but also the arrangement fees as well as the penalty fees. In total, no one should have to pay back more than twice what they borrowed, and there is a £15 cap on default charges.

The FCA has also been given stronger powers to ensure money is not being lent to people who cannot realistically afford to pay them back. I welcome the fact that tougher advertising rules have also been introduced ensuring adverts must warn of the risk of not paying the loans back on time, and must include a line directing customers to free, independent debt advice. The FCA also has the power to ban misleading adverts.

Additionally, the FCA has recently published the proposals of its latest high-cost credit review. Many of the proposals tackle prevention, including new rules on fees from overdrafts, and raising the standards of sales practices in the home-collected credit sector. There is also a proposed cap on rent-to-own lending, I understand that the FCA is currently consulting on all of these proposals. 

Thank you again for taking the time to contact me.