Payday Loans are a legitimate credit industry. As such, each lender is required to have a licence to operate. Laws and regulation are geographically determined based on the country in which the lender operates. But often regulation is not clear cut and there can be several bodies involved.
In the UK for instance, the Consumer Credit Act (1974) stipulates that all creditors, including payday lenders must have a licence from the Office of Fair Trading in order to operate and offer credit. The Office of Fair Trading (OFT) however will cease to operate in 2014, being replaced by Competition and Markets Authority (CMA). The OFT is essentially the UK's competition and consumer authority. They are responsible for enforcing and encouraging compliance with competition and consumer law.
In New Zealand, legislation comes in the form of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) which came into force in 2005 and which is currently under review for further change to encourage and target responsible lending practices. Some of the legal elements of the CCCFA are almost identical to those in the predecessor Credit Contracts Act 1981, but on the other hand there are elements that show significant evolution and change toward targeting consumer protection rather than just fair competition stimulus.
With regards to administering and enforcing the CCCFA, the responsibility of this was taken on by the Commerce Commission. However, while the Commerce Commission can investigate lenders that are suspected dot have breached the CCCFA, they do not take on the fight for individual debtors, who should seek to make a complaint under the Independent Resolution scheme of which all lenders are required to be a member of under the Financial Service Providers Act.
The problem with New Zealand has been much the same as the UK, where efforts were made to try and limit the amount of regulation and restriction imposed, in an attempt to encourage free trade and competition. However, as in most cases with half thought out regulation, this creates inefficient pockets and many conductors which ultimately turns to a large grey area that eventually needs addressed. In recent years the New Zealand financial industry has seen regulation pull together under one entity, the Financial Markets Authority (FMA) who’s self-proclaimed goal is “to promote and facilitate the development of fair, efficient and, transparent financial markets.”
It is easy to see how it can become confusing when trying to understand who regulates what and how the industry is controlled. In truth, in countries where authorities have tried to relax about regulation, to fit new services under old antiquated rules, they now have to go through a period of change to bring regulation up to date to suffice the evolving financial markets.
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