A code of practice was launched for short-term lenders in Parliament today amid heated exchanges between MPs and representatives of the short-term lending sector. The code of practice was launched by the Consumer Finance Association (CFA), which represents eight of the nine largest UK payday lenders, to provide a framework of good practice for the industry to adhere to.
The launch of the code was welcomed by debt charity Credit Action as evidence that the industry is taking steps to create good practice, but Stella Creasy, Labour MP for Walthamstow, and Fiona O’ Donnell, Labour MP for East Lothian, both voiced strong concerns that the code did not do enough to protect vulnerable consumers from the potentially detrimental aspects of payday loans.
Creasy, who has campaigned against some of the practices of short-term lenders, said: “This code is not good enough. We are not convinced it is even a starting point. If we are waiting around and the industry cannot get its act together to a decent standard, what can we do as MPs?”
John Lamidey, chief executive of the CFA, defended the code, arguing that it was aimed at ensuring clarity for customers and making sure lenders did not encourage excessive borrowing.
He said: “One of the big bugbears across financial services is consumers not understanding the products.
“To listen to our detractors you would think that all our customers have payment difficulties. That is absolutely not the case. Payday loans are there to smooth out the peaks and troughs of cashflow, unregulated alternatives are the worst thing for consumers.”
But Creasy rebuffed his comments, adding: “If John had come here today with some real commitments, such as capping interest rates, we would have seen that as progress. As soon as the industry gives us an insight into its business model we will be getting somewhere.”
Chairing the launch was Stephen Lloyd, Liberal Democrat MP for Eastbourne, who warned that should the code of practice not prove effective as a regulatory tool, it could lead the government to take further action.
He said: “If it (the code) does not work even this government will get a bit agitated, so to a certain extent the industry has an opportunity to self-regulate.”