Last month, the FCA outlined proposals to curb the behaviour of the industry; however, while it has been “encouraged” by the steps taken since by some lenders to improve their practices, the body said a recent investigation had revealed that customers in arrears continued to be treated unfairly, with inflexible repayment terms imposed and a lack of support and advice offered.

“Serious” non-compliance issues and improper practices were found by the FCA in every lender scrutinised; in some cases, a significant backlog of unanswered correspondence from borrowers was uncovered, including desperate pleas from vulnerable customers who hadn’t been able to meet repayments.

Some correspondence included medical documentation, and letters from debt advisers, offering crucial information on why certain customers were unable to meet repayment obligations. In many instances, these customers continued to be hounded by debt collection agencies, despite regulations stating that consumers who work with debt advisers to manage their outstanding financial responsibilities must be given “breathing space” from collection activity.

As of July, payday lenders wishing to stay in business must meet stringent regulatory requirements to receive FCA authorisation; those who have failed to make progress in key areas (such as transparency, fees and ‘fairness’) will lose their licence.

“Our rules are designed to ensure loans are affordable, that customers who get into difficulty are treated fairly, and that they are not pressurised into unaffordable and unsustainable repayment plans,” said Tracey McDermott, director of supervision and authorisations at the FCA.

“This segment of the industry has, for too long, been in the spotlight for the wrong reasons. It is essential that the more customer-focused approach we have started to see is maintained and embedded as we go forward.”