This paper reports on the findings of our thematic review of how payday lenders and other high-cost short-term credit (HCSTC) providers collect debts and treat borrowers who experience financial difficulty.
August 2025 update: This review is historical. See our what we publish[1] page for more information and current views.
Why did we carry out this thematic review?
When we took over responsibility for regulating consumer credit, in April 2014, we said that tackling poor practice in the high-cost short-term credit market was a key priority for the first year. We had seen practices that showed that customers, who were often struggling to make ends meet, were not being treated with sensitivity. We wanted to take a close look at this sector to find out how HCSTC providers, including payday lenders, were treating customers who struggled to repay.
Who should read this?
- firms operating, or considering operating, in the HCSTC market
- trade bodies representing these firms
- firms and other bodies that provide debt advice and solutions to consumers who use HCSTC
- individual consumers
- consumer representative groups
Our approach
We selected a sample of firms, including online and high-street businesses, which between them have around 60% of the market share. We scrutinised each firm’s procedures and visited their offices to interview and observe managers and staff. We listened to calls with customers and reviewed case files to look closely at the experiences customers had with firms when they were struggling to repay loans.
What were our findings?
We found unacceptable practices from many lenders, including failure to recognise customers in financial difficulty; failure to direct people to free debt advice; and firms offering inflexible repayment options. However, we also saw that many firms are making changes to improve, including changing senior management, training staff to deal with struggling customers and improving monitoring, compliance and managing risk.
Where we found rule breaches and unfair practices, we intervened swiftly to ensure failings were addressed and that firms improved their practices; firms have also agreed to pay redress to customers. In some cases our investigations are ongoing and we will consider what further action to take in due course.
What are the next steps
We have given feedback to each firm in our sample about the good and poor practices we observed in their businesses. In January 2015, we contacted all HCSTC firms to remind them that if they want to continue to conduct regulated consumer credit activities, they must demonstrate to us they are complying with the rules and treating customers fairly, including when customers struggle to repay a loan
Most firms that wish to continue engaging in regulated consumer credit activity have submitted applications for authorisation. We will scrutinise all HCSTC firms and those that cannot demonstrate that they meet our threshold conditions will be refused authorisation.
More information
Dear CEO letter - The FCA’s expectations of high-cost short-term lenders[3]