FLA wants its payday lenders to change their tune

In the wake of high levels of criticism from consumer groups and debt management companies for the actions of some instant cash loan providers, the Finance and Leasing Association wants its members who offer short term loans to customers to comply with new operational guidelines.

The industry body, which acts as a representative for around 50 firms that offer both motor finance and consumer credit such as instant cash loans, have said that payday lenders need to use more transparent methods when it comes to informing consumers with the cost of borrowing.  The FLA also wants payday lenders to limit the number of roll overs it permits its customers to no more than three and to offer reminders to borrowers that these loans are not suitable long-term borrowing solutions.

The FLA’s consumer finance head, Fiona Hoyle, commented on the new guidelines, said that a credit assessment should be carried out properly each and every time a roll over is taken up by a borrower, and only after he or she has specifically requested one.  This roll over cap is an essential part of the new FLA code, she added, as the changes are designed to institute more stringent standards for responsible lending.

The FLA is not the only industry body that is overhauling their operating standards.  The Consumer Finance Association, an organisation which represents nearly 75 per cent of the entire payday lending marketplace, also recently reported that it was currently hard at work on enhancements to its code with the help of other trade associations and the Department for Business Innovation and Skills.

John Lamidey, the CFA’s chief executive, disagreed with introducing a roll over cap, as it would only act as a detriment to consumers by forcing them to look for financing from alternative lenders until reaching their limit.  The new CFA code is set to launch later this year.

Mr Lamidey said that the roll over cap is being pushed by activists and politically-motivated critics, adding that while it may not be in the best interest of consumers to do so, the CFA may have no choice but to bow to the pressure being exerted upon it.

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