New regulation being introduced in the payday sector will soon require all payday lenders to clearly link to a price comparison website.
The new rule is being enforced by the Competition and Markets Authority (CMA) and aims to provide consumers with greater transparency and compare costs effectively with other similar loan products.
The Article 7.1 explains: ‘Each online lender is required to display a hyperlink prominently on its own website to at least one FCA-authorised payday loan PCW on which its own loans appear and/or to a portal containing hyperlinks to all FCA-authorised payday loan PCWs in the event that such a web portal has been created.’
While a portal has yet to be created, existing payday lenders can hyperlink to other FCA authorised price comparison websites including Money.co.uk and All The Lenders.
The change allows for better comparison of products
The idea of adding a link to price comparison websites was initially put forward by the CMA in 2015, but only now is it going to be compulsory for payday lenders such as Wonga, Quickquid and PaydayUK.
A spokesman from Uncle Buck says, ‘We welcome this change by the CMA to allow customers to click on a price comparison website and make a clear evaluation before applying for a loan product.
‘We hope that customers will see that our payday loans are competitive compared to other similar products out there and they will make an informed decision when applying.’
Other changes in the industry
Previous changes to increase transparency include lenders having to mention the representative APR and repayment example very clearly on their websites and marketing material. Loan providers must also have a warning message on every page that links to the Money Advice Service.
The influx of regulatory changes is part of a huge crackdown on payday lending in the UK. The industry that was once worth £2 billion, has attracted criticism from politicians and the general public for charging high rates of interest.
As a result, the Financial Conduct Authority took over as the regulatory body in January 2015. Their influence has been noticeable, with the introduction of a daily price cap of 0.8 per cent, limiting of rollovers and default charges capped at £15.
The largest change has required firms to become FCA authorised in order to practice as a lender or broker in the UK. Firms applying for authorisation are taken through a rigorous compliancy review to determine that they are ‘fit’ to offer financial products in the UK. With the process taking up to 12 months to be approved, several companies have been forced to exit the industry for not making the grade.
