Press release: CMA sets out proposals to lower payday loan costs

[Legal Beagles]

The CMA has set out proposals to increase price competition between payday lenders and help borrowers get a better deal.

These proposals have been developed in light of the Financial Conduct Authority’s (FCA) price cap proposals announced this July and will help ensure that the cap, which is intended to protect consumers from excessive charges, does not simply become a going rate charged by all lenders. They follow the Competition and Markets Authority’s (CMA) provisional findings into the market which were published in June (see note on research (PDF, 118KB, 2 pages) ) by the group of independent CMA panel members investigating this market.

9 October 2014: The CMA has today published its provisional decision on the package of remedies required to remedy the adverse effect on competition (AEC) and the resulting customer detriment it has provisionally found. It has also launched a consultation on an addendum to its provisional findings report, and published its customer research with payday lending customers. The consultation will close on Thursday 30 October 2014.

• Press release: CMA sets out proposals to lower payday loan costs 09.10.14
• Provisional decision on remedies (PDF, 3Mb) 09.10.14
• Notice of addendum to the provisional findings 09.10.14
• Addendum to the provisional findings report (PDF, 1Mb) 09.10.14
• TNS BMRB survey report (PDF, 6Mb) 09.10.14
• TNS BMRB survey report appendix (PDF, 7Mb) 09.10.14

Moves by the FCA (see notes for editors) to strengthen consumer protection mean closer regulation of lenders over issues such as limiting rollovers, restrictions on the use of Continuous Payment Authorities to recover debt from a borrower’s bank account, carrying out proper affordability checks and sensitive treatment of debt problems. The FCA has also set out its proposals for a price cap which it is required by legislation to introduce by 2 January 2015.
The CMA’s provisional decision on remedies, the addendum to provisional findings, customer research and all other information relating to the investigation can be found on the payday lending case page. The CMA is now inviting comments in writing on the provisional decision on remedies by 5pm on Thursday 30 October 2014 either by emailing paydaylending@cma.gsi.gov.uk or writing to:


Project Manager
Payday Lending Investigation
Competition and Markets Authority
Victoria House
Southampton Row
London WC1B 4AD

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[Amethyst]

Re: Press release: CMA sets out proposals to lower payday loan costs

28. We have therefore provisionally decided to issue an Order requiring payday lenders to provide their borrowers with details of the charges that the borrower has paid on both the most recent loan and also over the last 12 months. This would be available once a loan has been repaid. Lenders must ensure that before a borrower to whom that lender has previously provided credit is able to make a further application for credit from that lender, that lender should obtain confirmation from the borrower that they have reviewed the summary issued following the conclusion of the borrower’s most recent loan with them.



And this is interesting

Price comparison website remedy
The CMA provisionally intends to issue an Order to the effect that:
 lenders will be prohibited from supplying payday loans to UK customers unless details of their payday loan products are published on at least one accredited PCW which allows borrowers to compare that lender’s products with other products available in the market
 lenders will be required to supply such accredited PCW(s) with the information that the PCW(s) requires to comply with the terms of the accreditation
 lenders will be required to display a hyperlink prominently on their own websites to at least one accredited PCW on which its own loans appear and/or to a web portal containing hyperlinks to all accredited PCWs
In support of this Order – and in order to address the shortcomings of existing PCWs – the CMA provisionally intends to make a recommendation to the FCA to the effect that it establish and administer:
 an accreditation scheme for PCWs for payday loans
 a web portal containing hyperlinks to all accredited PCWs
It would be for the FCA to determine the precise criteria for accreditation. However, the CMA considers that, given the evidence that it has collected, and the AEC that it has provisionally found, it should provisionally recommend to the FCA that for a website to be accredited it would need to satisfy the following high-level criteria (under each criterion we have provided some specific examples):
Customer relevance
An accredited website should:
 enable customers to specify a desired loan amount, term (or repayment date) and repayment structure (eg the number of instalments) and to search for loans according to the specified criteria
 present borrowers with clear information about the structure and level of any late fees and charges before an onward referral to a lender can be made
 enable borrowers to identify easily whether early repayment is possible and how this may affect the price of the loan
23
Competitive neutrality
An accredited website should:
 present loan product information/results of the above searches in ascending order of price (the CMA’s recommendation, on the basis of the evidence it has found, is that the ranking be done by total cost of credit for each search result based on the specific search criteria used by a borrower) unless the borrower requests a different presentation
 present loan product information to customers on a competitively neutral basis, such that the presentation of product information, or its ranking on price comparison tables, is not affected by any commercial relationship the operator may have with lenders included on the PCW’s panel
Openness
An accredited website should:
 be open to any authorised lender, subject to agreement of reasonable commercial terms between the lender and website operator
 enable products offered by both online and high-street lenders to be presented on the website
Compliance
An accredited website should:
 follow all relevant laws and regulations with respect of consumer credit
 only deal with authorised lenders and exclude credit brokers and other intermediaries

[Amethyst]

Re: Press release: CMA sets out proposals to lower payday loan costs

This is a brilliant move IMO