The UK’s financial watchdog has recently started investigations into the payday lender PiggyBank. The Financial Conduct Authority (FCA) are examining the lender’s assessment process of its borrower’s creditworthiness. This creditworthiness determines if a borrower is “worthy” of being lent a loan by the providers, and often has much lower requirements than the standard high-street providers.
Payday, and other forms of high-cost short-term (HCST) lenders set their credit-worthy bar so low as their main clientele are those who have been rejected from the main high-street providers due to their poor credit rating. As a result of accepting mainly those with a low credit score, lenders will often charge extortionate interest rate on the loans they provide to the borrower.
The payday lender PiggyBank charges an up to 1,698.1% APR, and currently lends to 45,000 borrowers. The assessments for potential loan borrowers has been a significant cause for concern for the UK’s financial watchdog, who want to ensure that payday lenders like PiggyBank have a valid assessment process put in place for its checks in creditworthiness.
In response to its concerns, the FCA have requested for PiggyBank to stop lending temporarily whilst investigations are carried out into its creditworthiness assessment process. Current borrowers are still being encouraged to keep to their repayment plan, however the direct payday lender in question has been restricted from lending out any new loans until the FCA’s investigations have been concluded.
Existing borrowers can still manage their repayment plans both online and over the phone. The outcome for the FCA’s investigation is still fairly unclear, however, if lending practises are deemed irresponsible, this could affect not only potential, but also current PiggyBank customers.
Those who attempt to apply for a loan online with PiggyBank will be greeted with restricted access to the page in addition to the following statement: “We are currently making changes to our systems and processes and are unable to process any loan applications at this time. We aim to have our application system open shortly once these changes have been made. We apologise for any inconvenience caused.”
The FCA have not provided an end date for their investigations, therefore the future of PiggyBank’s lending is now unclear. Whilst the exact dates and findings for this investigation are, for now, being kept fairly close under wraps, the financial watchdog have come out with the following public statements:
“The firm [PiggyBank] has agreed to stop lending to customers and to carry out an external review of its lending policies.” Following this with the comment that “It is important all firms follow our rules, particularly when it comes to affordability and we will take action when we see breaches of our rules.”
The UK’s Financial Conduct Authority is continuing to ensure safe and fair lending is practised throughout the entirety of the country, and that lending practices throughout the HCST loaning sector meet the basic standards that are set, expected and further required by the FCA, and the country’s rules and regulations in general.