Payday lenders' new code in place
A new payday lenders' code of practice designed to give more protection to those in financial difficulty should now be fully in place.
A deadline has been reached for lenders to ensure they keep to the minimum standards included in the code.
This includes a limit on the rollover of payday loans, and breathing space for customers who are struggling to repay.
The code comes in as regulators formally investigate some lenders.'Significant step'
The code, put together by the Consumer Finance Association (CFA), which represents lenders, include aspects of a charter agreed with the government and other industry bodies in July.
This should mean payday lenders only roll over a loan to a customer on a maximum of three occasions. There should also be a minimum of 30 days of breathing space for customers who need to get their financial affairs in order, and the immediate freezing of interest for any customer in financial hardship
"While this is a significant step forward for the responsible members of the payday industry, it is far from the end of the journey," said Russell Hamblin-Boone, chief executive of the CFA.
"We will be introducing an independent monitoring framework and continue to work with the government, regulator and consumer groups to set high standards."
However, when the plans were announced in July, some consumer groups argued that the agreement did not go far enough.
The other three trade bodies that agreed to the new charter are the BCCA, a trade association for lenders offering short-term loans, the Consumer Credit Trade Association and the Finance and Leasing Association.
The code is voluntary, and any lender breaking the rules would be told to change the way it worked or face expulsion from their association.
Meanwhile, the OFT has warned the industry to improve the way it lends money and collects debts, or face fines or closures.
It has now begun formal investigations into several payday lenders over aggressive debt collection practices following a review of the industry.