Ad ban mooted for payday loan firms
Payday loan companies could be banned from advertising, the new financial regulator has warned.
Martin Wheatley, the chief executive of the new Financial Conduct Authority (FCA), said an advertising ban was one of the options it was considering as it prepared to take on the regulation of the industry from next April.
"Clearly that is an option that could be considered if it was felt that the way that advertising was being used couldn't be dealt with through any other measures short of that," he said.
"I think there are lots of problems with advertising - that is one element that has been commented on, the targeting of young people, students, children in some cases. If payday loan companies are genuinely targeting a particular income bracket - people with jobs - why do they advertise on daytime television?"
Mr Wheatley was speaking following a summit of lenders, regulators, charities and ministers intended to address the deep-rooted problems in an industry which is accused of making loans to people which they cannot afford to repay and then saddling them with exorbitant rates of interest.
Treasury Minister Sajid Javid said the take over by the FCA would mark a "step change" in the regulation of the industry.
"They now have to deal with a regulator with some real teeth. They are going to feel the hand of the regulator on their shoulder and they better get used to it," he said. "If there is any evidence of irresponsible lending, bad practices, rogue lenders, the regulator has a very important power independently to intervene in that market and to change the rules.
Even to get authorised under the new regime the regulator will look into every payday lender's business model, satisfy itself that it is happy with that business model, it is sustainable, it is sensible, it is responsible."
The meeting at the Department for Business, Skills and Innovation comes after the Office of Fair Trading (OFT) announced last week that it was referring the £2 billion industry to the Competition Commission.
The OFT said that consumers who could not afford to pay back their loans on time were finding themselves trapped with one firm when their loans are rolled over. It is also worried that firms are emphasising the speed of the loan over cost and that the pressure to hand loans out quickly may encourage lenders to "skimp" on affordability checks.