The FCA is best placed to deal with payday loans, but it’s not good news for everyone

Pay day loans companies have been found wanting in their practices, processes and in a lack of competition. There is little surprising in the Office of Fair Trading findings and the Competition Commission referral. It would be no bad thing if one or two of the 50 lost their licences ‘pour encourager les autres’. It is also interesting to say the least to see the FSA/FCA springing into action with a plan for how it will deal with the lenders, when it assumes powers to regulate them in 2014, reported here in Money Marketing.

But could this be mixed news for compliant and currently FSA-regulated businesses? It is at least arguable that because the FSA received responsibility for regulating mortgages, it was then stretched too thin and failed to nip lots of other problems in the retail market in the bud. One might even argue that a failure regulate for existing rules governing advisers (even to the FSA’s own satisfaction) contributed to the FSA taking much more dramatic action with the RDR.

We now know that pay day loans are a mess. We know that the FCA takes over their regulation in two stages in the next few years. We therefore have another big risk that the regulator is distracted by other matters. At a minimum, for advisers and providers, that is equally a blessing and a curse. No-one enjoys the regulator turning up on the doorstep – whether disguised as a mysterious shopper or not. But that is an awful lot better than the regulator turning up a few years later after a problem emerges with all the associated risks of retrospective regulation.

It is true that pay day loans firms are much smaller in number than thousands and thousands of mortgage brokers. The emerging FCA is also aware of the risks. But while the involvement of a powerful institution such as the FCA must be good news for a lot of vulnerable UK consumers, from a purely selfish perspective, it is less good news, for the population of currently regulated financial advisers and the companies which work with them.