One of the principal payday loan trading associations has defended the industry in front of an audience of MPs. The Consumer Finance Association (CFA) told a closed session of Parliament in May 2013 that it recognised that there were areas where improvements could be made, and that it was working to address these, but refuted suggestions that vulnerable borrowers were being unfairly targeted. Many parliamentarians have been very vocal in their attacks on the short-term lending sector, notably Labour’s Stella Creasy, who has described payday lenders as ‘legal loan sharks’.

The Association presented a report to the parliamentary session which suggested that a typical payday loan customer might be a single person aged 25-35 who rents their home, a parent aged 35-44 who is striving to provide for their children, or older adults who were providing financial help to elderly parents and/or grown-up children. It rejected suggestions that the typical borrower is from the poorest section of society.

The CFA admitted that its members could do more to ensure that loans were affordable, that clearer information was provided to customers and that assistance was provided to customers with repayment difficulties. Justin Tomlinson MP praised the Association’s stated commitment to higher standards, saying: “It is a credit to the CFA and its members that they are determined to raise standards.”

CFA members include the payday lenders QuickQuid and Payday UK.

Russell Hamblin-Boone, chief executive of the CFA, said: “The payday lending industry is continuing to evolve, learn and protect its customer base. We have already put in place standards for lenders to meet and have recently established an independent body to monitor and enforce these standards.”

The ‘independent body’ Mr Hamblin-Boone refers to is the CFA’s Short-term Lending Compliance Board, which has the power to expel member firms from the Association, or impose other sanctions, if they fail to meet required standards.

Also in May 2013, research by Citizens Advice suggested that 65% of payday loan applicants are not subject to an affordability assessment by the lender. Assessing affordability is a requirement of the Good Practice Customer Charter, which members of the CFA and three other trade associations – the Finance and Leasing Association, the British Cheque and Credit Association and the Consumer Credit Trade Association – have been subject to since November 2012.

The 12-week deadline for payday lenders to change their business practices, imposed by consumer credit regulator the Office of Fair Trading (OFT), expires in early June 2013. The 50 leading payday lenders face enforcement action if they cannot demonstrate that they have made improvements in a number of areas, such as affordability assessments, debt collection practices and the treatment of borrowers in financial difficulty. In early May 2013, payday lenders B2B International UK Ltd and Loansdirect2u.com Ltd lost their appeals against earlier OFT decisions to revoke their Consumer Credit Licences, and MCO Capital ceased trading in March 2013 after dropping its appeal against a similar OFT decision. In April 2013, Citizens Advice asked the OFT to withdraw the licence from four more unnamed lenders with immediate effect.

From April 2014, payday lenders will be subject to the stricter regulation of the Financial Conduct Authority, which has said it will regard short-term lending as a high risk area.