WIREDGOV

Communities and Tackling Poverty Minister, Jeff Cuthbert, is calling on the Financial Conduct Authority (FCA) to waste no time in its review of how payday lenders treat borrowers struggling to repay loans.

The FCA has taken over regulation of the consumer credit sector, which includes the payday sector, as of yesterday (1 April), and has previously announced plans to carry out a review of the industry.

The Minister said:

“Payday lenders prey on the most vulnerable in our society. We have all read stories of the unscrupulous and irresponsbile behaviour of some lenders and this review can’t come too soon. 

“I am very pleased that the FCA has a list of activities planned to rein in the extreme practices of some lenders in this field. Tighter rules to protect customers may mean some payday lenders close and this can only be a good thing for consumers.”

“We need to do more to warn people of the dangers of payday loan firms that charge sky-high interest rates that can trap people into an escalating circle of debt if they find that they cannot meet the re-payments. With stagnant incomes and a sluggish economy, more and more people are being tempted by these loans simply to get by. We need to ask ourselves if these companies are adequately assessing if people who apply to them can really afford the repayments. Are the interest rates they charge right or fair?”

For a number of years the Welsh Government has championed credit unions as offering an alternative to payday lenders. Credit unions are not-for-profit mutual financial co-operatives that take deposits and give loans to members and provide an alternative to traditional banks and high-rate loan providers.

Last month the Minster announced extended financial support totalling £1.9 million to credit unions across Wales for three years. This money will encourage credit unions to engage with financially excluded people and aim to put credit unions on a sustainable footing so they can survive without public funding.

In January the Minister announced funding of over £1.2m to support 19 projects to increase credit union membership in Wales. Schemes include a publicity campaign, money management education and the development of financial services.

Welsh Government funding for credit unions has supported the increase in  membership to approximately 73,000 members. The target now is for  the number of people using credit unions to increase to of 6% of the population by 2020.

There are 21 credit unions providing all Wales coverage. As at the end of March 2013, there are 32 credit union offices, with a total of 264 collection points throughout Wales.