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Payday lenders agree to new rules

Payday lenders agree to new rules

Category: Loans

Updated: 24/05/2012
First Published: 24/05/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Payday lenders have agreed a number of new measures to help stop borrowers racking up debts.

The Business Minister Norman Lamb said that four trade associations representing more than 90% of the payday lending and short term loan industry had signed up to a new customer charter.

Under the terms of the agreement, payday lenders have agreed to stop charges and further interest for borrowers having difficulty paying back debts, no more than 60 days later than the last payment.

Borrowers who agree a payment plan will also have their charges frozen.

The agreement – which will begin on 25 July – has been signed by the Consumer Finance Association, the Finance & Leasing Association, the British Cheque & Credit Association and the Consumer Credit Trade Association.

Customers will now also be informed three days before any money is taken from their account.

Mr Lamb described the agreement as a step in the right direction, but added that he wanted more to be done.

"I want to see further action- in particular, on the use of continuous payment authority," he said.

"Payday loans should only ever be used as a short-term financial stop-gap, not as a long-term solution to financial difficulties.

"I would urge people to think carefully before taking out a short term loan and to consider affordable alternatives such as their local Credit Union."

The Money Advice Trust echoed Mr Lamb's call for action to be taken over continuous payment authority – which allows lenders to take funds from borrowers' bank accounts.

"We are pleased to hear the Government recognise that this only one step in the right direction, and especially that more action must be taken to stop the abuse of continuous payment authority," said Joana Elson, chief executive of the Trust.

"It is clear that far more must be done to stem the tide of payday loan problems faced by more and more people across the UK every day."

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