United Kingdom-based payday lender Cheque Centre is permanently leaving the payday loan business and has suspended related debt collection calls following enforcement action by the Financial Conduct Authority.
The lender, in a voluntary agreement with FCA, will no longer sell loans that must be repaid in one lump sum. It has stopped debt collection calls to customers until it reviews and improves its processes. It further has agreed to amend its policies and procedures to ensure they are fully aligned with the FCAs rules.
Cheque Centre had been accused of poor practices in the way it treated customers in debt. The FCA reported that those problems were first identified by the Office of Fair Trading (OFT), which regulated the consumer credit sector until April 1. Tougher rules on payday loans were introduced by the FCA when it subsequently took over as the regulator of the payday industry.
"The FCA made clear their expectations under the new rules and we offered to make immediate changes," a company spokesman said. "One of the decisions we made was to accelerate our exit from payday lending. The transfer to the new regulator was the perfect time to make the change and we are now out of the payday market. We are also listening to our customers, and in the future we are going to concentrate on our significant foreign currency business, new and existing longer-term loan products as well as traditional pawnbroking services."
Cheque Centre, which has 451 branches in the UK, was the UK's second-largest payday lender. The company was notified of the OFT's concerns by a letter sent in March.
When it took over as the regulator, the FCA said it expected that up to a quarter of payday lenders might leave the market. FCA chief executive Martin Wheatley said: "This is an early victory for people that use payday lenders. We made our tougher expectations clear to Cheque Centre and they have wasted no time in making changes. I have said before that firms would need to dramatically improve their operation or exit the market, and we are now seeing that happening. This is an important step in the right direction and other payday lenders should take note."