Payday loan industry detractors have been campaigning for stricter regulation on lenders, saying that new rules being implemented to protect consumers do not do enough.
The no credit check short term loans industry will soon be subject to a new code of conduct by way of the Finance and Leasing Association aimed at limiting the number of roll overs that can be granted to a borrower to no more than three as a response to high levels of pressure from consumer groups and the government. However, detractors say that since the FLA has only one payday lender within its membership, more must be done to protect consumers.
The new regulations covering short term loans are viewed as a step in the right direction by Labour MP Stella Creasy, who has campaigned for the introduction of a cap on interest rates charged by payday lenders, but believes that the limitation of roll overs does not go nearly far enough to make a difference. The MP pointed to instant cash loan regulations in the US, where limiting the number of roll overs leads to borrowers simply paying off the loan and then taking out another loan immediately, and that the only way a roll over limitation would work is if there was a time limit of around a month in between loans.
The Consumer Credit Counselling Service, a debt advice charity, said through a spokeswoman that it would rather see lenders no longer permitted from rolling over loans at all instead of an arbitrary limit. The spokeswoman also said that some payday lenders that operate both in the UK and abroad have agreed to similar regulations in countries such as Canada.