Two linked payday lenders based in Brighton have been forced to cease trading. The First-Tier Tribunal rejected the appeals of B2B International UK Ltd and Loansdirect2u.com Ltd against an earlier decision by the Office of Fair Trading (OFT) to withdraw the firms’ Consumer Credit Licences. The OFT acted because an associate of both companies, Neil Evans, has a criminal record for fraud and violence, which he failed to disclose when applying for his licence. The OFT is likely to regard any applicant with convictions in these areas as unfit to practice in the consumer credit industry.
At the same hearing, the Tribunal also backed the OFT’s decision to refuse a licence application from VK Money Lifestyle, a company based in Hatfield which intended to offer debt management services. The OFT believed that VK did not have the necessary skills and expertise to operate in this area.
These firms may not be the last payday lenders to lose their licences. In March 2013, the OFT published the final results of a compliance review of the payday lending sector, where they found “evidence of widespread irresponsible lending”. As a result of this review, all 50 leading payday lenders were given 12 weeks to improve their practices and procedures or face enforcement action from the OFT, action which could include the removal of their licences. Furthermore, while B2B and Loansdirect2u.com were able to continue trading until their appeals were heard, the OFT now has a new power, granted in February 2013 under the terms of the Financial Services Act, to revoke licences with immediate effect where there is an urgent need to protect consumers. So could some of the UK’s best known payday lenders soon be forced to cease trading?
Earlier in April 2013, Citizens Advice wrote to the OFT calling on it to use this new power against four payday lenders. The firms have not been named, but it is reported that two of the lenders are well-known companies.
Since November 2012, those lenders which are members of one of four trade associations have had to comply with the requirements of a new Good Practice Customer Charter. From April 2014, all consumer credit firms will be subject to the stricter regulation of the Financial Conduct Authority (FCA), one of the bodies which replaced the former Financial Services Authority on 1 April 2013. The FCA has said it will regard payday lenders as high risk companies, who will be required to pay higher fees, and has said that scrutinising the payday loan sector will be a top priority.
Supporters of payday lenders point out that they provide credit to customers who may not be able to access credit elsewhere, and who may otherwise be drawn to loan sharks. Opponents say that payday loans are unduly expensive and are often granted without sufficient affordability and credit checks being performed.