The Business, Innovation and Skills committee has called for a ban on the marketing of payday loans through email, texts and other personal mobile devices, in a report published today.
Committee chair Adrian Bailey MP says: “Vulnerable people at their lowest ebb should not be bombarded by texts and telephone calls offering high cost loans. This is what anecdotal evidence suggests is happening.”
The BIS committee says the Financial Conduct Authority should hold talks with the Information Commissioners Office about collecting data on text message marketing to identify the extent of the problem.
Should the findings highlight inappropriate language or marketing, the committee says the regulator should step in to ban all mobile marketing or soliciting of payday loans.
Members of Parliament have welcomed the increased focus on the sector, which Bailey says is in “urgent need of overhaul.”
The committee has made key recommendations to curb the rapid expansion of the industry.
The report calls for payday loans companies to resubmit their customer affordability tests to the FCA for approval before continuing to trade.
A limit of one roll-over per payday loan has also been recommended as well as offering customers the right to cancel continuous payment authority arrangements whereby loans firms can repeatedly attempt to recoup payment from a customer’s bank account after failed collections.
Bailey says: “Payday loans should only be considered as a response to occasional financial shortfalls, not longer term financial difficulty. Rolling loans over multiple times makes them long term and therefore inappropriate.”