Payday lenders slammed for ‘unacceptable practices’ by FCA

Payday lenders have been slammed by the UK regulator for failing to treat customers in arrears fairly by using ‘unacceptable practices.’

The Financial Conduct Authority (FCA) has concluded a year long thematic review of the sector and says it found ‘serious non-compliance and unfair practices’ in every firm it investigated.


Faults included: failing to recognise customers in financial difficulty, failure to point such people to free debt advice and only offering inflexible repayment options.

Investigations are on-going at a number of firms while the regulator works out ‘appropriate levels of redress’ for those customers it believes have been treated poorly.

Breathing space

All firms are required to give ‘breathing space’ from debt collection to any customer working with a debt advisor to manage their debts.

However, three firms were continuing to pursue vulnerable customers with collection agents despite the consumers having submitted letters and documentation, including medical evidence and information from debt advisors detailing why they had failed to pay.


Other failings uncovered in the investigation include:

  • Repayment plans which were clearly unsustainable and later failed
  •  Failure of staff to deal appropriately with matters which went wrong – like not acknowledging and investigating complaints and consumers having to explain themselves multiple times because of poor record keeping
  •  Misleading practices being used to seek payment from customers in arrears
  •  Systems failures which resulted in things like incorrect balances on accounts, fees and charges being wrongly added and duplicate payments being taken


The FCA’s Tracey McDermott said: “Our rules are designed to ensure loans are affordable, that customers who get into difficulty are treated fairly and that they are not pressurised into unaffordable and unsustainable repayment plans.

“This segment of the industry has, for too long, been in the spotlight for the wrong reasons.  It is essential that the more customer-focused approach we have started to see is maintained and embedded as we go forward,” she said.


Despite the negativity in the report, the FCA says it is ‘encouraged’ at the steps taken by the industry in the last year to address poor practices.  The steps have included changes to senior management, training staff to deal with struggling customers, improvements in monitoring and compliance and managing risk.

Said Tracey: “The real test for these lenders will be FCA authorisation where they will have to demonstrate exactly how much progress they have made if they want to remain in the market.”