Result! Payday lenders face tough clampdown

By Jeff Salway
Published on 21/07/2012 14:24

Payday lenders face instant shutdown if they contravene trading rules under new powers aimed at boosting consumer protection against rogue loan firms.

The Office of Fair Trading will be able to suspend or revoke consumer credit licences with immediate effect after the government responded to calls for new legislation to rein in payday lenders.

As it stands, the OFT can suspend credit licences, but firms can continue trading while they appeal, a process that can last two years. The new powers, part of an amendment to the Financial Services Bill, mean they will no longer be able to operate once their licence has been withdrawn.

The crackdown is also aimed at dodgy debt collectors and debt advice firms. But the primary target is unscrupulous payday loan firms, accused of exploiting consumer debt woes by rolling over short-term loan repayments and charging interest rates of up to 16,000 per cent.

However, the OFT’s new powers are temporary, as the regulation of consumer credit operations will from April 2014 come under the Financial Conduct Authority.