Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, if he will bring forward proposals for tighter regulation of companies that carry out payment processing on behalf of payday loan companies.

The Government has fundamentally reformed regulation of the consumer credit market, transferring regulatory responsibility from the Office of Fair Trading (OFT) to the Financial Conduct Authority (FCA) on 1 April 2014. This more robust regulatory system is helping to deliver the Government’s vision for a well-functioning and sustainable consumer credit market which is able to meet consumers’ needs.

The FCA has incorporated key elements of OFT guidance on continuous payment authorities (CPAs) into its rules. In particular, firms are required not to use CPA if there is reason to believe that there are insufficient funds in the borrower’s account, or that this will leave insufficient funds for priority debts or other essential living expenses. Lenders must also show forbearance if there is evidence of financial difficulty.

The FCA have introduced rules to limit payday lenders’ use of CPAs to two unsuccessful attempts to withdraw funds from the customer’s account. The FCA has also banned CPA part payment, so that a lender can only take payment if the whole owed sum is available in the customer’s account. The FCA can use its flexible rule-making powers to take further action where it deems necessary to protect consumers.