(Reuters) - Britain's financial regulator has told lenders who loan cash to vulnerable people secured against their cars that they risk being shut down if they continue to squeeze and threaten customers and fail to raise standards. In its latest crackdown on the consumer credit market, the Financial Conduct Authority (FCA) said on Thursday some so-called "logbook lenders" made few affordability checks, encouraged applicants to manipulate income details and failed to mention cooling off periods, hefty interest rates and the consequences of default.
"People who use logbook loans are often in difficult circumstances with few other borrowing options," said Christopher Woolard, the FCA's director of policy, risk and research, warning that the FCA would remove unscrupulous lenders from the market.
"The last thing that should be happening is for them to be squeezed yet more or even threatened, but that is what our research has found ... Logbook lenders should consider this as fair notice to improve and put their customers first or we won’t hesitate to take action."
The FCA, which on April 1 took on responsibility for regulating logbook loans as part of its remit to police the consumer credit market, said that research carried on last November and December found consumers who took out such loans often did so as a last resort and rarely shopped around.
Logbook loans range from 500 pounds to 50,000 pounds ($840-$83,800), although the average amount borrowed is around 1,000 pounds. Loans normally last between six and 18 months with interest rates at 400 percent or higher, the FCA said.
(Reporting by Kirstin Ridley in London and Aashika Jain in Bangalore; Editing by Mark Potter)