CFA launches lending code for payday lenders

The Consumer Finance Association (CFA), which represents payday lenders, launched a new code of practice last week in the House of Commons, supported by Stephen Lloyd MP, as reported on cfa-uk.co.uk.

Payday loans are small amounts of money borrowed over short periods - perhaps to see someone through to the next payday.

The Lending Code of Practice for Small Cash Advances is for the businesses that provide small cash loans from the high street, online or over the phone.

The code was developed with input from the Payday Loan Forum - whose members include consumer credit trade associations, Government departments and consumer groups.

This Forum was specifically established by the CFA following recommendations by the Office of Fair Trading in its `High Cost Credit Review` (published June 2010) and the Consumer Focus report `Keeping the Plates Spinning`(published August 2010).

Some MPs have criticised the code and said policing it needs to be `far tighter`. The head of CFA, John Lamidey, argues that payday loans are far cheaper than other forms of credit, such as unauthorised overdrafts. For example, if you compare the equivalent APR of certain unauthorised overdrafts with the APR of certain payday loans, the payday loan can work out cheaper.