A CHARITY which advises people on debt has welcomed more stringent controls on payday lenders as a ‘step in the right direction’.
The East Staffordshire Citizen’s Advise Bureau, which helps people with debt problems in Uttoxeter, spoke out after the Financial Conduct Authority revealed strict new rules.
The authority has warned it will ‘take out’ lenders which do not follow the changes, which include tougher regulation on extortionate interest rates.
High interest rates are often cited as the cause of spiralling debt for borrowers who are unable to keep up with repayments.
But Emily Sendell, an advisor at the CAB, said the charity was confident the changes would make a positive impact.
She said: “It’s fantastic news, we really welcome the changes.
“It’s a step in the right direction and it’s day one so what has been announced is a brilliant start.”
Payday lenders have often come under fire for what some people claim are excessive interest rates.
It is hoped the changes will mean money is only leant to those who are able to afford to repay the loan.
The Financial Conduct Authority will take over regulation of credit providers, hire purchases and debt management firms from the Office of Fair Trading.
Miss Sendell added that the CAB passes on statistics and advice to the authority.
She said: “Nationally, we work with the authority and provide them with all of our statistics to do with payday lenders and people who are struggling with repayments.
“We have a lot of clients who do not have the means to repay.
“We had a single parent who took out £350 but who now owes almost 10 times that amount because she couldn’t afford to pay it back.”
The latest national statistics from the CAB paint a gloomy picture of those who struggle to repay their loan.
About 86 per cent did not have their interest rate frozen, 80 per cent said they were not treated with sympathy, 84 per cent were not told the risks of extending the loan and a third claim they were pressurised to extend the loan.
Martin Wheatley, chief executive of the FCA, said: “Our processes will probably force about a quarter of the firms out of the industry, and that’s a good thing, as those are the ones that have poor practices.”
But critics claim the demand for payday loans will still be there, despite the changes, and that restricting access could lead people to use less-reputable sources.