Stella Creasy Says FCA Saw Collapse Of Payday Loans Lenders
11 Nov 2019
Approx Reading time: 3 minutes
- Stella Creasy calls for investigation of FCA over the collapse of payday loans lenders
- Wonga and QuickQuid investigate by FCA and ordered to compensate customers in 2014 and 2015
- FCA blamed for failing to take action on lenders despite having informants in the companies
Payday loans campaigner Stella Creasy has said that the FCA saw the collapse of payday loan lenders. The Labour Party legislator is now calling for a probe into the FCA's regulation of QuickQuid and Wonga’s collapse.
Payday loans companies collapse
In 2018 UK’s largest payday lender Wonga collapsed after it was hit with a series of compensation claims. Customers raised claims against the lender regarding expensive loans advanced to them by Wonga.
On the same note, another payday lender went into administration last month. CashEuroNet UK, the parent company of QuickQuid, placed the lender in administration following failure to reach an agreement on compensation. As a result, the move left around 1 million customers in doubt after failing to pay compensation claims.
Also Read: What Are Payday Loans?
In 2014 the financial services regulator investigated Wonga and directed it to write off around 330,000 loans estimated at £200m. It also directed the payday lender to compensate over 45,000 customers. The FCA has been cracking the whip, and in 2015, it forced CashEuroNet to write off over 2,500 loans. Equally, it ordered the owner of QuickQuid to compensate over 1,500 customers at approximately £1.7m.
FCA blamed for regulatory failure
According to Creasy, despite the FCA having "skilled person" in the lenders, they nonetheless continued their bad practices. The companies were to change their lending practices and stick to regulations, but it seems they did not heed. Creasy is now asking the Treasury minister and the regulator to release reports of the "skilled person."
She has equally asked for an assessment of the financial regulator’s actions. The anti-payday loans campaigner indicated that it was the role of the FCA to keep an eye on the lenders. She added that it was unfortunate that the companies are collapsing something the FCA saw coming.
Payday lenders offering expensive loans
Therefore customers’ mis-sold unaffordable loans will be left out of the pocket because they won't be compensated. As a result, borrowers will as well have to deal with third party loan collectors. The payday loan lenders were charging very high-interest rates of up to 400%.
According to the Centre for Responsible Credit, the collapse of Wonga last year was a warning sign. It demonstrated that there was a regulatory failure that should have triggered a probe as per the Financial Services Act. However, the FCA indicates that a customer loss of around £30 million is the minimum required to trigger a public report. Equally, if it is over £150m, it is substantial for various consumers. Interestingly Wonga had losses of more than £400, but that didn't trigger a public report.