The industry defends its profits with hysteria and hostility. They claim both customers are internet savvy consumers who prefer speed and convenience, and vulnerable to illegal backstreet lenders. They bluster "caps would drive the industry out of business" – when the evidence shows the reverse is true. Bad practice is rife and widespread - little wonder the Office of Fair Trading referred the entire industry to the Competition Commission. The Citizens Advice study found 76pc of payday loan customers would have case to take to the financial ombudsman. Capping is the quickest way to reform this market but it is not a panacea – we also need real-time credit checking; notifications of continuous payment authority (CPA), access to debt and budgeting advice and more credit unions.
Whilst the FCA proposals show Britain is waking up to the danger, my fear is that we are not acting quickly enough. Without real action we could face a future with millions permanently indebted, stuck in a spiral they can't escape.
Russell Hamblin-Boone, chief executive of the Consumer Finance Association
Everyone has a view about payday loans. In fact, I often say that just 4per cent of the population have used payday loans but 96per cent have a strong opinion about them.
Negative stories abound of spiraling debt and eye watering interest rates with every borrower caught in a debt trap, never to escape. Fed a fact-free diet of stories like that, there is little wonder politicians and regulators are concerned about payday loans. Who wouldn't be?
It's not rocket science – these are short-term loans with an average interest of 25pc that are not designed to manage long-term debts.
Few industries have faced such intense scrutiny in such a short period of time. However despite the pressure of growing up in the glare of the public spotlight, the major short-term lenders that I represent have been openly engaged in all of the studies and inquiries that the Government and regulator has initiated and have been proactive in addressing concerns.
We have also been actively debating the issues in public and working closely, not only with the Government and the regulator, but also with leading debt charities and consumer groups to raise standards and ensure consumers benefit from flexible access to short-term credit, wrapped in multiple layers of protection.
Of course, there are still rogue lenders operating in the market place and we are fully behind the regulator's plans to continue to drive out such practice.
The draft Financial Conduct Authority (FCA) rulebook certainly sets the bar at a level which rogue lenders will struggle to reach and which complements the standards we have delivered through our independently audited, voluntary Code of Practice which our members are committed to. Yet this isn't enough for some who ignore all of the evidence and still call for alternative remedies, such as capping the cost of credit, despite the
Government's own extensive research and experience in other countries where capping has been proven not to provide the solution suggested.
Fortunately, the FCA is not there to regulate for the benefit of those who hold strong views. It is regulating for the good of consumers who value the transparency, flexibility and convenience of short-term loans. And that's the nub of the matter. Customers like payday loans and the vast majority use them responsibly and pay back on time.
And that's why we are proud about payday; the facts and the customers speak for themselves.
What's more, responsible payday lenders will continue to look for ways to raise standards and protect consumers through both statutory regulation and the self-regulation. Other industries should take note.
