Government are concerned at the impact of high cost credit products on the most vulnerable people in society. A diverse and innovative credit market benefits consumers, but there is a fine line between promoting choice and some of the recent innovations in the payday loan market, such as loans offered via the internet or mobile phone, that appear to make it too easy to access credit anywhere and at any time without thinking through the implications.
We will shortly be implementing the new Consumer Credit Directive into UK law. The directive will give consumers new protections such as a 14-day right to cancel any credit agreement without penalty and require lenders, including payday lenders, to provide clear information to consumers on new loans, and check borrowers’ creditworthiness before lending.
The Office of Fair Trading will soon be publishing its new Irresponsible Lending Guidance covering the marketing and selling of credit products. The guidance will ensure that that lenders do not irresponsibly promote credit and will make clear the standards expected of them at all stages of the lending process. Government are determined to tackle irresponsible lenders, and those who are unable or unwilling to follow the guidance face being stripped of their credit licences.
The Office of Fair Trading is also reviewing the high cost credit area, including analysis on the impact of interest rate caps, and they are due to publish their findings and recommendations shortly. We will not hesitate to act if the review finds that further action is necessary to protect consumers.