(MENAFN - AFP) Britain on Thursday unveiled measures to curb lenders that offer short-term loans at high rates, with regulators insisting that consumers must be subjected to stricter affordability tests.
The Financial Conduct Authority (FCA) said that from April the government would take responsibility for the so-called payday lending industry that on an annual basis is worth about 2.0 billion (3.23 billion, 2.37 billion euros).
Back in June, regulators cited "deep-rooted" problems within the industry, noting that some payday lenders were seen to take advantage of people in financial difficulty.
Going forward, the FCA said lenders will have to carry out a detailed affordability check on borrowers rather than making quick decisions. Additionally, it plans to limit what lenders can say in adverts and will have the power to ban any misleading campaigns.
"The clock is ticking," said FCA chief executive Martin Wheatley.
"Today I am putting payday lenders on notice: tougher regulation is coming and I expect them all to make changes so that consumers can get a fair outcome."
Britain's competition watchdog, the Competition Commission, is separately investigating the payday loan industry and is due to report at the end of next year.
Payday loans are paid out immediately, access to them is relatively easy, but the interest rates charged can be extremely high.
Regulators have found that an average loan is for between 265 and 270 and borrowed over 30 days. Meanwhile the average cost of borrowing just 100 is about 25, but in some cases reach half the loan amount.
The FCA's new rules were welcomed by Martin Lewis, founder of consumer help website MoneySavingExpert.com.
"Parasitical payday lenders have taken over our high streets in the last five years... For those of us who've been crying out for a crackdown, this hardcore regulation, while not perfect, is very welcome."