What is the Financial Conduct Authority?

The Financial Conduct Authority (FCA) is a governing body in the UK who make sure any business involved in your money is fully regulated and compliant with rules that keep you and your finances safe. Being registered with the FCA is one of the main trust signals you should look out for when asking whether an online lender can be trusted or not.

To help you make informed decisions about safe lending, we’ve put together this guide on how the FCA protects consumers looking to borrow short-term credit. We’ll answer common questions about what the FCA is, what their responsibilities are, and what the FCA’s role is in consumer finance.

In this guide:

• What is the FCA?
• How does the FCA regulate UK payday lenders?
• What is a responsible lender?
• What do the FCA regulations mean for Moneyboat?

What is the FCA?

The FCA is the organisation that regulates the conduct of nearly 60,000 financial services firms in the UK to ensure that the entire industry looks out for consumers, businesses, and the economy.

Set up in April 2013, the FCA took over from the previous Financial Services Authority (FSA) and has three key goals:

• Protect consumers
• Protect the integrity of the UK financial system
• Encourage fair and effective competition to benefit consumers

What does the FCA do?

Not only does the FCA play an important role in protecting the reputation of the financial market and financial services industry in the UK, but it also works to uphold the values of competition within these industries to help consumers access the very best products without falling victim to poor lending practices.

It does this by building a register of authorised financial firms and individuals, creating rules, issuing guidance, and working to detect and remedy risks across the market.

How is the FCA funded?

Funding for the FCA comes from the membership fee it charges firms to be on their register. Strict vetting is in place to ensure only legitimate firms are placed on the register.

How does the FCA regulate UK payday lenders?

In 2014, the FCA took over the regulation of consumer credit and began implementing strict rules to protect borrowers from unfair lending practices. This was largely in response to the way firms such as Wonga operated in the payday loans space.

Thankfully, the FCAs new regulations on payday loans have had a positive impact. Safeguarding is in place for customers and our approach to responsible lending has been widely adopted across the industry.

How the FCA changed payday loans to protect consumers

The FCA took an in-depth look into the market and the problems that short-term borrowers were experiencing before it introduced their new price cap and regulations. FCA officials looked at the credit records belonging to over 4.6 million people to find out what people did if they were turned down for payday loans.

They also analysed several payday loan lenders and millions of loans to find out what effect the price cap would have on the industry, and talked to regulatory bodies that had introduced similar caps in other countries. This all painted a clear picture for the FCA, allowing them to introduce a balanced set of regulations, limits and caps that work for everyone.

The changes the FCA brought in came into force from 2015 and formed a three-pronged strategy on removing payday loan scams, unfair fees, and high interest charges.

What are the interest and price caps applied to UK payday lenders?

In order to protect and support consumers, the FCA:

1. Limit the interest rates charged to a maximum of 0.8% of the value of the loan per day
2. Limited the penalties applied for non-payment to £15
3. Applied a cap of 100% of the loan value to the cost of all charges and fees – protecting consumers from ever having to pay more than double what they borrowed

What impact have the FCA regulations had on UK payday lenders?

The FCA’s measures go a very long way to ensure that the payday loans industry now works for consumers, offering them a useful service in the form of affordable loans that meet a genuine demand.

FCA-regulated UK lenders and fintech firms now want to increase their exposure to borrowers who can afford the terms of the loan and will not default, while companies that could not or would not meet the new criteria either collapsed or left the market.

Can the FCA help me find the best payday loans UK lenders have to offer?

Yes! The interest price cap and limits introduced by the FCA brought an end to many payday lenders who were operating irresponsibly. Therefore, by checking that your direct lender is FCA-authorised and regulated, you can minimise the risk of taking out a loan with a poor-quality lender.

Learn how to check the FCA register for a payday lender and how to compare payday loans effectively with our in-depth guides.

What is a responsible lender?

In order to be officially classed as a responsible lender, businesses and firms need to submit an application to the FCA to demonstrate that they comply with the FCA's principles of business.

There are many rules set out by the FCA that must be followed in order for lenders and fintech businesses to be classed as responsible. These regulations also help to safeguard people using guarantors, those borrowing in pairs, and loans for small business purposes.

See our guide on what responsible lending looks like for more guidance.

What are unregulated loans?

Unregulated loans are loans which are not protected by the FCA. This means that in the event of something going wrong, you’ll have less protection.

You might be familiar with the phrase ‘loan shark’ – this refers to any lender that isn’t regulated or licensed. Learn more about loan sharks and how to spot them on our blog.

How does this affect me as a borrower?

The FCA price cap and regulations have had an overwhelmingly positive impact on the welfare of borrowers.

As well as better affordability and credit checks, lenders can now offer more flexible repayment options, such as instalment loans, which can be repaid over the course of a few months, rather than in a single lump sum on the borrower's next payday. This can help relieve the pressure on consumers and allow them to spread the cost of repaying a loan.

Although the percentage of consumers able to access payday loans may have fallen due to the FCA’s regulations, it’s largely because this type of loan wouldn’t be suitable for those who don’t qualify – and could risk them falling into greater financial difficulty.

What do the FCA regulations mean for Moneyboat?

Here at Moneyboat, we welcome the new fairer world of short-term lending and pride ourselves on our responsible lending credentials.

We’re a direct lender, not a broker. We offer transparent, flexible loans for a lower rate than the FCA’s cap of 0.8% per day. Before approving any loan application, we carry out careful, personalised checks to ensure borrowers can afford to pay it back over several months. We’re also happy to accept early repayment with no hidden fees or penalties.

And if you want to find us on the FCA’s register you can do so with our registration number: 674154.

Being registered is one thing. Our commitment to our customers see us blessed with many positive reviews on our Trustpilot.

Where can I access free financial advice?

If you’re struggling with money or worried about falling into debt, contact a free and independent support organisation for help – these non-judgemental services can give you advice and guidance on taking control of your finances.