Since taking over from the Office of Fair Trading (OFT), the FCA has targeted sectors it believes are capable of doing the most harm to consumers such as credit broking, debt management and payday lending.
To weed out rogue firms, the FCA forced businesses to reapply for permission to continue operating giving the regulator an opportunity to look under the bonnet of consumer credit companies to examine their practices.
Since taking over the reins on 1 April 2014, the regulator has refused authorisation to 40 consumer credit firms which didn’t meet its standards with over 100 debt management firms choosing to leave the industry rather than embrace the stricter requirements to treat customers fairly.
In a speech on the consumer credit journey so far, Tracey McDermott, acting chief executive of the FCA, said ‘it had made significant progress in driving up standards’ but there was ‘much still to do’.
McDermott said that the headlines emerging from the sector, since it transferred away from the OFT, of firms taking advantage of vulnerable customers was not a true reflection of the whole industry.
She said the majority of consumer credit was lent to customers who could afford it and use it sensibly but there still remained, in some sectors, a culture which encouraged staff to take advantage of their customers.
“…I am not confident that we can yet say we have seen the end of the poor practices that have tarnished the industry,” said McDermott. “But we are determined to drive up standards and, encouragingly, we are seeing businesses begin to make the necessary changes to meet the requirements of the new world.”
Payday lenders were singled out as one area in consumer credit which had made major improvements to their affordability assessments which had led to a drastic reduction in the amount payday loans being offered.
Since the first half of 2013, the number of loans has fallen from 6.3 million in the first half of 2013, to 4.2 million for the same period in 2014 down to 1.8 million last year.
Citizens’ Advice has reported a reduction over the same timeframe in the number of clients they see with problem debt arising from payday.