A big thorn in the side for Payday Loans

[BBoo]

Apologies if I missed this before. Although passed in 2009, it HAD to be implemented by Jan 1st 2012. Most banks left it till this date unsurprisingly.

It gives the consumer the right to stop the Continuous Payment Authority which has plagued people with Payday Loans, without having to change banks, or even close their account.

Thought it was worth a second mention in case anyone else missed it if it has been mentioned before.

The Payment Services Regulations 2009

[pompeyfaith]

Re: A big thorn in the side for Payday Loans

Never knew about this so Thank you Bboo

[Never-In-Doubt]

Re: A big thorn in the side for Payday Loans

Apologies if I missed this before. Although passed in 2009, it HAD to be implemented by Jan 1st 2012. Most banks left it till this date unsurprisingly.

It gives the consumer the right to stop the Continuous Payment Authority which has plagued people with Payday Loans, without having to change banks, or even close their account.

Thought it was worth a second mention in case anyone else missed it if it has been mentioned before.

The Payment Services Regulations 2009

Full document attached to this thread - thanks

[Riz]

Re: A big thorn in the side for Payday Loans

That is the thing. I've heard nothing about this, so I'm a little bit sceptical about it's applicability.

Especially as reading the other sections that Bboo hasn't linked to, there seems to be quite prescriptive limits on when the payer can actually withdraw consent in a fashion that would render payments "unauthorised" for the purpose of s61.

If Bboo has some official docs or links to show real world application to PDL and continuous payment authorities then that would be helpful.

[BBoo]

Re: A big thorn in the side for Payday Loans

Rizz and FP I totally agree. It's one thing having the legislation in place - it's another thing altogether whether people can use it. They can't use what they don't know about.

I think it is potentially very usable against Payday Loans and know of someone who says they have done this successfully - I have no reason to doubt them, but equally don't know them personally. My advice OTR was that the safest thing, until someone known to us has tried and tested it, is to close the account and open another with an unrelated bank still.

When you think about it, the banks have had from 2009 to implement this. They have all done it at the last possible minute. Why? Because they make more money from letting customers go into unauthorised overdrafts and get into difficulties.

My belief is that this is precisely why they have not publicised it - it simply is not in their interests to do so.

That is not to say we shouldn't do everything we possibly can to publicise it whenever we can. It is a powerful move in the right direction, but only if people know about it. Would it not be good if, as well as having to publish interest rates, PL companies had to add a sentence about this legislation as well.

[Riz]

Re: A big thorn in the side for Payday Loans

I wouldn't expect banks to implement voluntarily, or publicise, anything which goes against their interests.

That is not what I am surprised about.

I am surprised that I've seen no consumer advice from official/semi official/or other sources advising that people should now have enhanced rights under this.

If it was valid, then I would have thought that at least would be out there. I can't believe everyone else apart from the person you helped would be "blind" to this right up until this point.

I may have completely missed any references. Entirely possible. Which is why I ask if anyone has any to refer to.

[Riz]

Re: A big thorn in the side for Payday Loans

http://www.citizensadvice.org.uk/off...ry_final-2.pdf

Page 6-7 of that is supportive of the argument from a quick Google.

But critical of the OFT who they believe have missed this out of their DCG.

[Riz]

Re: A big thorn in the side for Payday Loans

Seems from the above that CAB had to go and ask the FSA in 2010 what the position regarding CPAs and the right to cancel was.

However, in order to achieve these outcomes the OFT must ensure the examples used in the final guidance are correct and clear and reflect the requirements of the PSRs. We are concerned that the current draft does not do this at present. In particular, it is disappointing that the OFT appears to have inadvertently perpetuated one of the most common and detrimental myths surrounding CPAs – that consumers have “no automatic right to cancel” a CPA.

The PSRs implement the Payment Services Directive 2007 into UK law and require payment service providers to comply with certain rules and specific requirements about providing payment services and payment transactions. The FSA is responsible for ensuring that all authorised or registered payment service providers adhere to the PSRs.

We have spoken to the FSA about the PSRs’ application to continuous payment authorities and the proposals set out in this consultation. We now understand that regulation 55 (3) and (4) of the PSRs gives payment services users an absolute right to withdraw consent from a payment transaction or series of payment transactions, up to the last point at which authorisation can be revoked – which in the case of CPAs would be the end of the business day before the payment is due.3 We therefore believe that the guidance must be amended to reflect this.

Citizens Advice strongly supports the OFT’s intentions behind the proposed new examples in paragraph 3.9 (m) and (n) of the guidance. We believe they could force consumer credit licence holders to use CPAs and other payment system correctly and therefore drive up lending and debt collection practices across the board. Unfortunately we do not be believe the current wording correctly represents consumers rights under the PSRs. As a result we believe the existing text must be rewritten. Our reasoning and suggested rewording is set out below:

We understand the PSRs define a payment transaction as “an act, initiated by the payer or payee, of placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and payee.” And under regulation 55 (1) a payment transaction is only regarded as having been authorised if the payer – i.e. the debtor – gives their consent for a payment or series of payments to taken. They do not say how payers and payees should agree the times and amounts of any payments.

Instead regulation 55 goes on to give the payer the absolute right to withdraw consent at anytime subject to regulation 67 (2) to (5) – which, in the case of CPAs, allows the payer to withdraw consent at anytime up to the end of business on the day before the payment is due.

At all points these regulations are silent as to how and in what form consent can be given and withdrawn. Instead they rely on evidence held by the payment services provider and the case by case analysis of individual claims to decide whether or not any given payment transaction was or was not authorised.4 Such ambiguity is not helpful in the regulation of high volume, high risk activities such as payday lending and debt collection.

We understand that the payday lending industry has tried to bypass this confusion by writing terms into their contracts and suggesting wording for their code of conduct that allows them to make multiple requests for payments. We believe, however, that they cannot use such measures to get round the PSRs. As we have already shown, payment transactions are “irrespective of any other obligations”,5 so no matter what lenders put in their contracts or codes of conduct – if a payer tells their payment services provider not to allow a payment to go through, it is unauthorised. If it goes through, the payer is entitled to an immediate refund – including any interest and charges.

We believe these regulations should allow payers – i.e. debtors - great control over how their debit and credit cards are used, but that these are misunderstood, bypassed or ignored by poor practices which allow firms to effectively take what they want when they want from a consumer’s bank or credit card account.

We believe that this mis-use of consumers’ debit and credit cards fundamentally undermines responsible lending, fair and proper debt collection practices and the ability of consumers to pay for everyday essential and meet their existing credit commitments – because their income is taken at source by who ever has access to their card details.

We believe that businesses using continuous payment authorities will comply with the PSRs if they do the following:

- Inform consumers at the earliest opportunity that they can withdraw consent from, and effectively cancel, any payment or series of payments at anytime up until the end of the business day before the payment is due;
- Inform consumers how they can withdraw consent;
- Enable consumers to withdraw consent either by text, phone, online or in person;
- Set out exactly when payments will be taken;
- Set out exactly how much each payment will be for;
- Use failed payment requests as prima facie evidence of financial difficulty; and
- Stops all subsequent payment requests until after the consumer has been contacted, offered free debt advice, had a chance to review and confirm all future payments dates and amounts and given their express consent for payment transactions to resume.

We are already aware of at least one large consumer credit licence holder that uses CPAs in this way.

For the reasons we have set out above, we believe that the OFT’s revised guidance needs to be amended to take account of the PSRs. We set out how this can be done later in our response.

[BBoo]

Re: A big thorn in the side for Payday Loans

I read something last night about it which was from an authoritative source, and stated the PSR's could be used for this purpose.

The wording does need tightening (or is it deliberately vague?) and the publicity of this has been nothing short of appalling. Really any licensed debt help charity should have received information about this at the minimum.

Sadly, the fact remains that it is simply not in the industry's own interests to advertise this. I wonder if we could put together a FOI request asking how many people had used this act? I shall certainly write to my MP now, and express my viewpoint on this once I've done a bit more reading.

[Riz]

Re: A big thorn in the side for Payday Loans

Well, clearly they had to go to the FSA last year to check what the PSR meant and applied to, and they are still having a "bun fight" with the OFT over it.

Perhaps that is why nothing was put out? As even advice organisations were (or seems still are with the OFT) having trouble getting a clear view on how it applied?

[BBoo]

Re: A big thorn in the side for Payday Loans

This is what I was reading last night from Michael Browne at the FSA, so the most authoritative voice so far, clearly stating recurring payment authorities can be cancelled:

http://www.fsa.gov.uk/static/pubs/co...ghts_guide.pdf

Guess it's down to us missing it and the fact that there was a 3 year implementation period.

[Riz]

Re: A big thorn in the side for Payday Loans

Not sure about missing it. I sorta get the impression that the powers that be have been arguing about it behind the scenes, hence why nothing was put out.

That FSA document is after all dated Jan 2012, longer after CAB approached them to ask.

Also looks as if the OFT haven't budged on using the

"there is no automatic right to cancel"

phrase in: http://www.oft.gov.uk/OFTwork/consul...supplementary/

Can only hope that replies to that will result in the OFT taking heed and changing that phraseology and making the right to cancel clear.

[Riz]

Re: A big thorn in the side for Payday Loans

Anyway Bbo, sorry to place devils advocate, but I disn'tt want to do a "Gander", and say here's a great new (old) regulation that cures all ills, without some backup evidence IYSWIM.

[BBoo]

Re: A big thorn in the side for Payday Loans

I never thought I'd use the banks arguments of OFT guidance myself, but at the end of the day, the OFT publication is just that, guidance, the other is legislation. If the FSA are as clear as they are on p15 of the above document, then I would use that and the original legislation against the banks, and let them come back with the guidelines for once.

Strange to see the tables turned like that!

[BBoo]

Re: A big thorn in the side for Payday Loans

Anyway Bbo, sorry to place devils advocate, but I disn'tt want to do a "Gander", and say here's a great new (old) regulation that cures all ills, without some backup evidence IYSWIM.

Totally agree - it should all be subject to scrutiny. The thing with this is it's genuinely both old and new in that it came out in 2009, but didn't have to be implemented till a month ago.It's always very healthy to debate these things - at the end of the day I'm as sceptical as everyone else, but if I can find a way to use it and make it work, I will move heaven and earth to do so.