Payday lender firms are widely failing to treat customers in arrears fairly, the Financial Conduct Authority has reported following a 12-month review of the sector.
In the review, which covers 60% of lenders in the market, the FCA said it found ‘serious non-compliance and unfair practices’ in all firms that it looked at.
The regulator found that lenders are failing to recognise when customers are in financial difficulty and to direct them to debt advice, while the FCA also said lenders’ repayment options have been inflexible.
Tracey McDermott, director of supervision and authorisations at the FCA, said: “Our rules are designed to ensure loans are affordable; that customers who get into difficulty are treated fairly and that they are not pressurised into unaffordable and unsustainable repayment plans.
“This segment of the industry has, for too long, been in the spotlight for the wrong reasons. It is essential that the more customer-focused approach we have started to see is maintained and embedded as we go forward.
“The real test for these lenders will be FCA authorisation where they will have to demonstrate exactly how much progress they have made if they want to remain in the market.”
The FCA said that in some cases investigations are ongoing, while it will work with firms to determine appropriate levels of redress for those affected.
Tim Wheeldon, managing director of Fluent Money, said: “The FCA presented a game changer for personal finances when it introduced the payday loans cap at the start of the year, but its recent statement proves that while a law can take immediate effect, a cultural shift requires a longer wait.
“The fact that payday lenders continue to pursue borrowers and exploit the avenues still available to them in spite of new regulation is an ongoing problem. It reveals the need not just for tighter restrictions on Wonga et al., but for educating borrowers on their legitimate, more reliable financial options.”