Tightening rules about firms’ conduct has helped to get rid of the deadwood from a section of the credit industry, which badly needs a reputation overhaul.

The findings of the FCA’s review of the high cost, short term credit market were undoubtedly damning. The regulator found widespread failures in how payday lenders treat customers.

The report revealed “unacceptable practices” from many lenders, including failures to recognise customers in financial difficulty, failure to direct people to free debt advice, and firms offering inflexible repayment options.

But forcing firms that don’t meet regulatory requirements out of business is no bad thing. With fewer, bigger lenders left in the market, the majority of whom were compliant all along, it can only be a positive thing for consumers and the non-standard industry alike.

But clearing out the deadwood from the industry could be a long process. The consumer credit sector is big: there are roughly 40,000 businesses in the sector across multiple product propositions and of all shapes and sizes.

The behaviour of some lenders has undoubtedly tarnished the whole sector.

But that doesn’t mean to say, the sector’s reputation can never recover: far from it. By acting ethically and responsibly, those of us left active in non-standard credit can together challenge common misconceptions about this part of the financial services industry.

There are roughly 12 million people in the UK who the banks will turn down and the vast majority of non-standard lenders aim to help these people – not rip them off.

One thing that irks me in the whole financial services industry is the concept that when a customer is having a difficult time – and so unable to repay a debt – the lender adds on an extra fee or default charge.   I just don’t understand it for a number of reasons. From an ethics perspective, piling on more fees when the customer is in difficulty is immoral. But also from a financial perspective, what is the point of loading on an additional charge to a customer who can’t afford to pay you the basic interest?

An ethical lender will work with customers when times are tough and not impose any late fees of any kind.

You learn a lot about the misconceptions about the non-standard sector when you tell people what you do for a living. I was surprised at people’s attitudes when I left a role at a building society to join Provident Financial: some asked how I slept at night.

However, it’s the fact that banks and building societies are so restrictive about who they lend to, that means people have to turn to alternative lenders like us. So I’d ask, how do they sleep at night?

A lot of negative attitudes come from people who aren’t our customers – there’s a big difference between what our customers think about us and what people who have never dealt with us think.

So, how can the sub-prime sector improve its image? I think that’s a matter for each individual lender. However, the FCA should set the bar high and make sure lenders both protect customer interests and improve customer outcomes.

So far the FCA is doing this very well. It’s made it clear that if you want a license to operate, and keep that licence, you must meet certain conditions. As one of the largest lenders in this sector we have a responsibility to work very closely with the regulator in terms of making sure customer outcomes are the right ones.

The FCA is working hard to understand how business models within consumer credit operate and I often get asked the question “could the FCA be stricter?”

Undoubtedly some providers are still not playing by the rules, whether it’s a financial promotion or some part of their product design.

The bigger, more responsible providers have an obligation to flag those businesses to the regulator. It’s an on-going process and it’s going to be a two to three-year journey of completely cleaning up the sector and making sure that every non-standard lender is operating in a responsible and customer centric way.

Looking forward, it’s an interesting time for the non-standard market. Roughly one in four of the population are either turned down or turned off by banks and building societies.

We think this number may grow over time as the banks and the building societies get both tighter in their credit standards and their capital requirements.

So the demand in our market is on the increase. However supply is likely to reduce rapidly as a result of increased regulation and the exit of those players who don’t make the grade.

What we’ll hopefully end up with is a smaller number of lenders who strive to deliver favourable customer outcomes.

From a customer perspective, it’s not good news if in the long run there isn’t enough supply and so I would encourage other non-standard lenders out there to put their money where their mouth is and set, and stick to, higher standards.

Provident Financial incorporates brands such as Satsuma Loans.