In the past, the rules and regulations on payday loans were vague in the UK. This enabled predatory payday lenders to take advantage of people short of income. Luckily, this is no longer the case, and the responsible lenders have moved to the forefront.
Many options are available today, from payday loans to bad-credit business loans.
You might wonder who regulates short-term loans? What laws and restrictions are there? How do they benefit you?
There are systems in place to protect you. Read on to learn about them.
Who Regulates Payday Loans in the UK?
The main regulatory body for consumer credit in the UK is the Financial Conduct Authority (FCA). Payday loan lenders must apply for FCA-authorisation before they begin business. To do this, they must meet the minimum requirements as set out by the FCA.
For full permission to operate, lenders must submit forms, business plans, and IT self-assessments to the FCA. They must prove they can conduct affordability assessments, deal with late payments and write clear communications. The FCA may then grant authorisation.
The Financial Ombudsman Service
The Financial Ombudsman Service (FOS), like the FCA, regulates the industry. The FOS deals with consumer complaints – you can also complain to the FCA in some cases. The UK Parliament formed the FOS in 2001 to support consumers with financial complaints.
The FOS can order businesses to correct a mistake or pay you compensation. They help settle disputes between both parties.
The Consumer Credit Act and UK Law
The Consumer Credit Act 1974 (CCA) forms the basis of your rights when you borrow money. It applies to payday lenders as well as banks and credit card companies. The CCA protects you when you take out a loan or make purchase with a credit card.
The CCA states what information you need to take out a loan. It is the responsibility of the lender to give you this and explain it. The CCA also specifies the content and form of a credit contract, as well as how lenders work out APR.
Early settlement is covered by the CCA too, as is termination and default protocols. Lenders must give you a cooling-off period of 14-days, but you must pay back the loan amount and any accrued interest.
The Data Protection Act
The Data Protection Act 2018 (DPA) helps keep your personal information safe. Some businesses use your data or sell it onto other companies for profit. The Data Protection Act states what a lender can and cannot do with information you give them.
Look for General Data Protection Regulation (GDPR) compliance when choosing a lender. The DPA is the UK’s version of the EU’s GDPR. The most reliable lenders adhere to the rules, and direct lenders are in a better position comply than brokers.
Ready to Move Forward?
UK consumer credit regulation is there to protect you. By learning more, you give yourself an edge over predatory lenders. You will be able to spot the reliable lenders with ease, and you will know your rights when you apply for your payday loan.
