After taking on responsibility for High Cost Short Term Credit (HCSTC) – better known as payday loans – in April 2014, the FCA have now completed their first review into the performance and behaviours of those lenders still in the high cost marketplace. The report makes for interesting reading and ultimately suggests that whilst there has been lots of improvement from participants, there is still a lot of work to do.

In many ways, the significant list of areas and associated companies that ‘require improvement’ must be of concern and frustration to the FCA. They have set their criteria and standards out very clearly and yet it appears that many companies have either not understood their obligations, or perhaps more worryingly decided not to implement or stick to them. None of the shortcomings seen within the report could be considered a positive outcome for customers and there is very much a recurring theme throughout the document with the FCA making statements such as:

“In a number of cases we have investigated where we found unfair practices. We have taken swift action to stop poor practice and mitigate risk, and we have secured voluntary commitments to provide redress to customers who have suffered harm as a result of unfair treatment.”


“In a number of firms we found evidence of serious non-compliance and unfair practices. These included the content of some debt collection communications, and misleading practices used to obtain monies from customers in arrears. “

It remains to be announced exactly how many of the HCSTC firms actually decided to submit their full permissions application. For virtually all impacted firms the deadline was the 28th February 2015, yet with only weeks to spare it was very apparent that many firms had not yet submitted their forms. This delayed take up could well be due to lenders rapidly changing policies, procedures or even personnel “All firms had undergone changes to their senior management just prior to or shortly after the FCA took over regulation or as a direct result of discoveries through our review”.

An alternate view is that a number of the players in the market had seen the writing on the wall for their particular brand of lending and had decided to make the most of the opportunity offered by the application window regime (i.e. giving them up to 10 months after the FCA took over the oversight of the market before having to apply for full authorisation). It is highly believable that some firms simply decided that the requirements imposed upon them would make getting approved highly unlikely, or crippling to their business models and as such looked to generate the maximum income they could before the door was firmly shut in their face. As such, they would not seek to make the changes the FCA have demanded.

This view may been seen as controversial, and probably not one the FCA would like to admit could occur in a marketplace that they control and where protecting the customer is one of the raison d’êtres. Yet it appears that in spite of the FCAs repeated communications and the work done to date there is a long way to go. In the next couple of months the industry will start to see how many companies dropped out before the deadline and how many subsequently withdraw their products and exit but with the FCA stating: “…none of the firms we reviewed were sufficiently prepared for FCA regulation and they had not yet adapted their businesses to meet the required standard” and “…The authorisations process will scrutinise in-depth all lenders seeking the HCSTC permission and those that cannot demonstrate that they meet the threshold conditions will be refused.” it would be reasonable to expect much change over the remainder of 2015.

All quotes from the FCA document TR15/3