The Consumer Council and NICVA have welcomed the proposals from the Financial Conduct Authority (FCA) to cap the fees on payday loans.
Speaking about the proposals, Aodhan O’Donnell Consumer Council Interim Chief Executive said; “The FCA proposals mean that consumers would be protected against escalating costs. A total cost cap means that borrowers will never have to pay back more in charges and interest than the original amount they borrowed. This would provide greater protection, especially for vulnerable consumers, who regularly access cash via pay day loans.
“While the proposals do go some way towards helping consumers, they do not prevent companies from conducting irresponsible practices such as omitting credit checks and explaining what happens with ‘roll over’ fees. We expect the FCA to monitor the changes that they have implemented to date in the payday loan market, and ensure that they are updated and strengthened as necessary.
“As always we would encourage consumers who decide to access cash via a payday loan to fully understand the pros and cons of this method of borrowing.”
Aodhan concluded “We will be responding to the FCA’s consultation and will continue to contribute to the Competition and Market Authority’s current investigation of payday lending, to ensure that the needs and concerns of NI consumers are taken into account in any changes to legislation or enforcement”.
Lisa McElherron, Head of Public Affairs at NICVA said, “We welcome this proposed cap on fees for payday loans and hope that it might goes some way to preventing people getting into debt. However it is clear that in these difficult financial times people still sometimes need access to credit to meet unplanned or unmanageable expenses. The last thing we want to see is people having to turn to unlicensed money-lending, or loan sharks. That’s why NICVA is working with a range of agencies to explore a Northern Ireland accessible credit scheme.”
The Consumer Council has developed an ‘Understanding Payday Loans’ guide to help consumers get to grips with how payday loans operate and the costs associated with this type of borrowing. This is available to download from the Consumer Council’s website www.consumercouncil.org.uk along with ‘Thinking about borrowing money – your guide to different types of credit’ or by contacting the Consumer Council on 0800 121 6022.