Industry regulation and standards
Short-term lenders operate to strict rules that are enforced by the Financial Conduct Authority. The FCA took over regulation of consumer credit on 1st April 2014.
The rules and guidance are available here.
On 2nd January 2015, the FCA introduced a cap on the amount short-term lenders can charge. Details are available here.
All lenders must be authorised by the FCA. The status of lenders (including short term lenders) can be checked on the FCA register.
Paving the way for the FCA
Prior to April 2014, regulation of the consumer credit industry was the responsibility of the Office of Fair Trading.
In addition to the statutory regulation, the CFA operated an enhanced Code of Practice to give consumers greater rights and protection.
The CFA’s Code encompassed and exceeded the Good Practice Customer Charter, which is the set of minimum standards agreed by the Government (Department of Business, Skills and Innovation), former regulator (OFT) and three other trade associations representing short-term lenders. The Charter came into force in November 2012.
Advertising and Marketing
High cost short term credit providers must abide by the same laws and regulations as all other consumer credit providers. However, despite this and a lack of robust evidence, the advertising and marketing of short-term loans has been of the cause of concern in some quarters.
For this reason, in November 2014, CFA members agreed to abide by some additional voluntary guidelines to reinforce their commitment to marketing their products responsibly. These commitments focus on areas of potential concern relating specifically to HCSTC products: advertising to children, targeting financially vulnerable consumers, trivialising debt and incentivising credit.
Alongside this, BCAP conducted a year-long review of the advertising of payday loans on TV. As a result, more than half a year after the CFA introduced its guidelines, BCAP published additional guidance for the whole industry in June 2015. BCAP consulted recently on the issue of scheduling of advertising for short-term loans.