The UK’s Financial Conduct Authority (FCA) has asked payday lenders to review their lending processes to determine if their creditworthiness assessments are compliant.
In a letter addressed to CEOs of short-term lenders, the regulator said that such firms should make fix wherever loopholes are identified.
FCA payday lenders
Such firms have also been directed to inform the FCA on failing to meet their financial commitments owing to remediation costs.
“We expect firms to make appropriate provision for any remediation which may be required, including associated costs (for example, fees to the Ombudsman). If doing so calls into question your firm’s ability both now and in the future to meet its financial commitments as they fall due, you must notify the FCA immediately,” the watchdog noted.
The regulator also reminded lenders of its requirements of affordable lending.
“If the firm identifies that its processes do not comply, it should take appropriate steps to address this, which may include considering whether to cease lending until any contraventions are remedied. If the firm becomes aware or has information which reasonably suggests that there are significant breaches of our rules, it must inform the FCA immediately,” the regulator stated.
The latest move by the regulator follows British payday lender Wonga’s collapse earlier this year, after a surge in compensation claims.