Check Center Stops Payday Loans After FCA Review

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UK warning shot fired payday lenders as one of the largest companies in the industry exits the market under regulatory pressure.

As part of an agreement with the Financial conduct authority, the UK’s watchdog, the Check Center must stop selling loans that have to be paid off in one go.

The lender – which has 451 branches on Main Street – has also suspended debt collection phone calls to customers and promised to change its policies and procedures to comply with regulatory standards.

The bad practices of the Edinburgh Check Center were uncovered by FCA’s predecessor, the Office of Fair Trading, which expressed “serious concerns” in late March.

“This is a first victory for people who use payday lenders,” said Martin Wheatley, chief executive of the FCA, who warned others in the industry should take note.

“I’ve said before that companies should dramatically improve their operations or exit the market, and now we’re seeing that happening.”

Payday lenders, such as QuickQuid and Wonga, typically advance clients relatively small sums of money for short periods of time at high interest rates. The representative annual interest payable on a Wonga cash loan is 5,853 percent.

When the FCA assumed oversight of the consumer credit industry on April 1, strict payday loan rules were introduced to crack down on “the debt cycle.”

As part of these measures, lenders must perform more rigorous affordability checks and cannot allow borrowers to renew their loans more than twice. Research by the OFT found that about half of lenders’ income came from rollover loans.

In its statement on Tuesday, the FCA said it would appoint someone to assess the procedural changes the Check Center agreed to make. Until she can demonstrate to the regulator that improvements have been made, the company’s debt collection phone calls are on hold.

“The FCA has made its expectations clear under the new rules and we have offered to make immediate changes,” Check Center said. “One of the decisions we made was to accelerate our exit from payday loans. “

In addition to phasing out its payday loan products, the Check Center voluntarily suspended the sale of 12-month loans until it completed a retraining process for its staff. Those with outstanding loans with the Check Center will still need to repay their loan as scheduled.

The company – ultimately owned by a US short-term lending group, Axcess Financial – also offers traditional check-cashing, foreign exchange and pawnshop services.

“We continue to believe that there is an opportunity for us to serve those who have been overlooked by the banks,” the company said.

The FCA statement comes a week after the Association of Chartered Certified Accountants accused payday lenders of causing “enormous harm to clients” in the form of repeated defaults and borrowing.

“It’s an encouraging sign that the short-term credit market is being cleaned up,” said Mike O’Connor, chief executive of the debt charity StepChange, which has helped 66,500 people with payday loan debt in 2013 – an 82% increase over 2012..

“Too often payday lenders have cynically exploited vulnerable consumers and we should all be supporting the FCA in creating a short-term credit market that meets people’s needs while treating them fairly.”


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