The centre for responsible credit have reacted to today’s release of the Payday lenders Code of Practice by labelling it a ‘bitter dissapointment’. Read the full response below:
Payday lenders have failed to clean up their act: Government must now intervene
The Code of Practice being launched today by payday lenders is a bitter disappointment and fails to address the poor practices evident in this sector of the high cost credit industry, according to the Centre for Responsible Credit .
CfRC research published last year found that the UK’s regulation of payday lending was much weaker than is the case in the US and Canada, where many states and provinces restrict the amount of loan size relative to the borrowers income and prevent lenders from continually rolling over loans – a practice which is lucrative for the lender but which often drives customers deep into debt and has been found to drive people into bankruptcy.
The payday lending industry was also criticised by the Office of Fair Trading in its High Cost Credit Review published over 12 months ago. At that time, the OFT maintained that the industry should be given a chance to „self-regulate‟ and encouraged it to establish a code of practice. However, the issues raised by the OFT in its review have not been addressed by the CFA code published today.
Commenting on the poor quality of the CFA Code, Damon Gibbons, Chief Executive at the Centre for Responsible Credit, said:
“This code has no real substance and does not address the problems with payday loans. The industry has shown itself incapable of self regulation, and Government and the OFT must now act by reviewing the business models of payday lenders to see if they are compatible with the principles of responsible lending, and capping the cost of credit to protect consumers from exploitation by this industry.”