The Financial Conduct Authority (FCA) has today published its response to the Competition and Market Authority’s (CMA) payday lending market investigation.
In February 2015, the CMA proposed six remedies to improve competition in the payday lending market, following the introduction of a price cap for high-cost short-term credit (HCSTC) by the FCA last year.
The CMA recommended that the FCA review its standards for price comparison websites (PCWs) which display payday loans, before a CMA order requiring all payday lenders to list their products on at least one PCW comes into effect. The Consultation Paper published today consults on these proposed additional conduct standards. The proposals include requiring PCWs comparing HCSTC products to:
- rank products in ascending order of price according to the total amount payable and not give products greater prominence as a result of commercial relationships
- ensure any additional advertising on PCWs for HCSTC is outside the ranking tables and not interspersed with it
- enable consumers to search according to the amount and duration of loan that they require
- disclose on their website the extent of their market coverage by listing the number and names of the firms whose products they compare.
The Consultation Paper also addresses a number of other areas:
- the use of real-time data sharing to enable informed credit assessments
- measures to improve shopping around without affecting consumers’ credit ratings
- improved disclosure on the costs of borrowing
- credit broking/lead generation.
Christopher Woolard, Director of Strategy and Competition at the FCA, said: "We would like to see consumers benefit from greater competition and transparency in the high-cost short-term credit market, enabling them to make more informed choices and find the best value loan for their circumstances."
The FCA is consulting with industry and consumer groups to seek their views on the proposed standards. The consultation closes on 28 January 2016.
Notes to editors
- Consultation Paper 15/33: Consumer credit: proposals in response to the CMA’s recommendations on high-cost short-term credit[1]
- On 1 April 2014, the FCA took over responsibility for consumer credit and the regulation of 50,000 consumer credit firms, including logbook lenders, payday lenders and debt management firms.
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers, to protect and enhance the integrity of the UK financial system, and to promote effective competition in the interests of consumers.
- Find out more information about the FCA[2]