Oct 2 - Britain's financial regulator warns the payday lending industry it will impose much tougher rules on the sector, insisting that lenders check whether borrowers can afford their loans and limiting the number of times the loans can be extended. Kirsty Basset reports.
It's notorious for charging high interest rates, in some cases over 5,000 per cent. But Britain's payday loan industry is about to be subjected to tough new rules. It's a move welcomed by many, including Mike Dixon from the Citizens Advice Bureau. (SOUNDBITE)(ENGLISH) ASSISTANT CHIEF EXECUTIVE OF THE CITIZENS ADVICE BUREAU, MIKE DIXON, SAYING: "At the moment people are having bank accounts emptied, they're having payday lenders take money that they didn't actually owe in the first place, payday lenders are lending to kids. This industry is out of control." Britain's Financial Conduct Authority will force payday lenders to check whether borrowers can afford their loans - and limit the number of times a loan can be extended. They'll also be banned from dipping into a customer's bank account more than twice to recoup money. But the authority has stopped short of bringing in a cap on interest rates. Martin Wheatley is the CEO. (SOUNDBITE)(ENGLISH) CEO OF THE FINANCIAL CONDUCT AUTHORITY (FCA) SAYING: "I hope the biggest difference will be less irresponsible lending to people who can't afford it. That's been the biggest problem - not that people who can't afford it aren't getting a service. It's the 20, 25 per cent who find themselves unable to repay and move into a debt spiral that they can't escape from." The supervision will begin next April. And critics will be carefully monitoring the impact on an industry which has boomed since the onset of the financial crisis.