News story

Payday lenders make progress protecting vulnerable borrowers

The revised Codes of Practice were published by the four Trade Associations which represent over 90 per cent of the payday and short-term loan…

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government


The revised Codes of Practice were published by the four Trade Associations which represent over 90 per cent of the payday and short-term loan industry. They follow on from the Government’s Response to the BIS Select Committee’s Report into Debt Management, when new commitments were agreed to help deliver increased protection for consumers.

The payday lenders have committed to:

  • a good practice customer charter explaining how loans work and the costs involved;

  • increased transparency about loan repayment so that consumers can make informed decisions and are not surprised by hidden payments;

  • more help for customers in financial difficulty by freezing charges and interest;

  • robust credit and affordability assessments to ensure loans are suitable for the customer’s situation; and

  • effective compliance monitoring by the Trade Associations to root out poor practice in the industry.

Business Minister Norman Lamb said:

“The new Codes of Practice published today represent a positive and important step forward by the payday lending industry. They will have a real impact helping consumers to make the right decisions when they opt for a payday loan, ensuring they do so fully informed and are not caught out by hidden charges.

“I welcome the hard work and commitment of the four Trade Associations to deliver better consumer protections. But, at a time when more consumers may turn to payday loans to manage spending, this is no time for complacency. The industry must continue its commitment to root out rogue lenders and tackle bad practice. I expect to see real results on the ground coming out of these additions to the lenders’ codes of practice and that the Trade Associations will undertake a proper assessment of how well they are working.

“I also want to see further action particularly on the use of continuous payment authority. I know the OFT is consulting on this and I expect the industry to respond effectively to any recommendations emerging out of this work.

“Payday loans should only ever be used as a short-term financial fix, not as a long-term solution to financial difficulties. I would urge people to think carefully before taking out a short term loan and to consider affordable alternatives such as their local Credit Union.”

The Government is also strengthening enforcement powers across the whole of consumer credit by giving the Office of Fair Trading (OFT) the authority to suspend a consumer credit licence with immediate effect where there is an urgent need to do so to protect the interest of consumers. Currently the OFT has the power to suspend or revoke a consumer credit licence but businesses can appeal the decision which can take up to two years to deal with. These businesses can currently continue to trade during this time, leaving consumers vulnerable.

The new power will help clamp down on rogue companies that provide goods or services on credit, lend money, collect debts or help people with debt problems.

The Department for Business will continue to work with the OFT to drive up standards in the payday lending industry and continue close working with the Trade Associations as they implement their new codes of practice.

**Notes to Editors

**1. The BIS Select Committee report was published on 7 March at

  1. The four trade associations that have agreed to the commitments are the Consumer Finance Association (CFA), Finance and Leasing Association (FLA), British Cheque and Credit Association (BCCA) and Consumer Credit Trade Association (CCTA).

  2. Information on the OFT’s new power to suspend consumer credit licences can be found at

  3. The OFT’s consultation on the use of continuous payment authority can be found at

5. The industry will implement all the agreed commitments in the revised codes of practice by 26 November 2012, although some firms may launch earlier.

  1. The Government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries.’ It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
  • To create the most competitive tax system in the G20

  • To make the UK the best place in Europe to start, finance and grow a business

  • To encourage investment and exports as a route to a more balanced economy

  • To create a more educated workforce that is the most flexible in Europe.

Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.

  1. BIS’s online newsroom contains the latest press notices and speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See []( for more information.

Notes to Editors

Contact Information

Name BIS Press Office Job Title

Division Department for Business, Innovation & Skills Phone




Published 25 July 2012