FCA consultation paper payday lending market

29 October 2015

The Financial Conduct Authority (FCA) recently 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 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, and
• 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, and
• 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.

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