CFA launches new code of practice – is it enough protection?

The Consumer Finance Association has announced a new code of practice for payday lenders, but is it enough to protect consumers against payday advance lenders?

The CFA, a trade body which oversees a number of the larger payday loan providers i the UK, launched the new code of practice in direct response to criticism that consumers were being targeted with hidden charges and high fees when taking out short term loans from payday lenders. However, two consumer campaigners have said that the guidelines the CFA has set down will not adequately protect borrowers from being victimised by payday lenders because they do not go far enough to limit the reach and scope of these lenders.

Richard Lloyd, the executive director of consumer advocate Which?, remarked that expectations were much higher for the new code of practice. While it’s true that the CFA’s new rules will call for lenders to use more transparent language, make the total repayment costs of a loan more clear and prominent before a loan application, and to discourage borrowers from taking more cash than needed, Mr Lloyd said that these new rules are simply a rebrand of a large number of the rules already put in place – and summarily ignored – by many disreputable lenders.

Consumer Focus’ director of financial services, Sarah Brooks, also commented on the new code, remarking that it still has far to go before it protects consumers against their vulnerabilities. A large number of the concerns expressed by Consumer Focus still exist, Ms Brooks said, questioning whether there will be fair and equitable processes set in place to help consumers who experience difficulties in making a repayment or if lenders will use sufficiently robust affordability checks to prevent irresponsible lending.

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