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27/06/2013
Competition Inquiry For Payday Loan Industry
The Office of Fair Trading (OFT) has referred the payday lending industry to the Competition Commission over concerns it has about "deep-rooted problems" with the way competition works.
It said customers found it difficult to identify or compare the full cost of payday loans, and that there were barriers to switching between lenders when loans were "rolled over".
The OFT also voiced concerns that lenders are competing primarily on the availability and speed of loan approval, rather than price. It suggested the competitive pressure to approve loans quickly may "give firms an incentive to skimp on the affordability assessment which is designed to prevent irresponsible lending and protect consumers."
In addition, the agency said that some of the business models of companies operating in the industry were causing concern, because they were "predicated on making loans which are unaffordable, leading to borrowers paying far more than expected through rollovers, additional interest and other charges".
It added that lenders appeared to make up to 50% of their revenues from such practices.
The OFT concluded that the Competition Commission is best placed to investigate and help resolve the "fundamental problems" it had identified within the market, saying the work of the Commission would be able to provide the Financial Conduct Authority (FCA) with a "sound evidential basis on which to develop its rules and apply its new powers after it takes over responsibility for regulating the payday market from April 2014."
The FCA's powers will include the ability to place a possible cap on interest rates and a ban or limit on the number of rollovers lenders may offer. The Commission can also impose remedies itself, including banning or limiting particular features of a product or market.
(JP/CD)
It said customers found it difficult to identify or compare the full cost of payday loans, and that there were barriers to switching between lenders when loans were "rolled over".
The OFT also voiced concerns that lenders are competing primarily on the availability and speed of loan approval, rather than price. It suggested the competitive pressure to approve loans quickly may "give firms an incentive to skimp on the affordability assessment which is designed to prevent irresponsible lending and protect consumers."
In addition, the agency said that some of the business models of companies operating in the industry were causing concern, because they were "predicated on making loans which are unaffordable, leading to borrowers paying far more than expected through rollovers, additional interest and other charges".
It added that lenders appeared to make up to 50% of their revenues from such practices.
The OFT concluded that the Competition Commission is best placed to investigate and help resolve the "fundamental problems" it had identified within the market, saying the work of the Commission would be able to provide the Financial Conduct Authority (FCA) with a "sound evidential basis on which to develop its rules and apply its new powers after it takes over responsibility for regulating the payday market from April 2014."
The FCA's powers will include the ability to place a possible cap on interest rates and a ban or limit on the number of rollovers lenders may offer. The Commission can also impose remedies itself, including banning or limiting particular features of a product or market.
(JP/CD)
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06 March 2013
Payday Lenders Risk Losing Licenses
The OFT is giving the leading 50 payday lenders, accounting for 90 per cent of the payday market, 12 weeks to change their business practices or risk losing their licences. They uncovered evidence of widespread irresponsible lending and failure to comply with the standards required of them.
Payday Lenders Risk Losing Licenses
The OFT is giving the leading 50 payday lenders, accounting for 90 per cent of the payday market, 12 weeks to change their business practices or risk losing their licences. They uncovered evidence of widespread irresponsible lending and failure to comply with the standards required of them.
02 September 2014
Increase In People Struggling With Payday Loans
The number of people struggling with payday loans is increasing, according to debt charity StepChange. In the first six months of 2014 the charity helped almost 13,000 more people with payday loan debts than in the same period last year.
Increase In People Struggling With Payday Loans
The number of people struggling with payday loans is increasing, according to debt charity StepChange. In the first six months of 2014 the charity helped almost 13,000 more people with payday loan debts than in the same period last year.
07 December 2011
Payday Loans Make Situation Worse, Says Report
Half of those taking high interest, short-term payday loans have reported it made their situation worse, according to a study published on Wednesday. The research from insolvency trade body R3 found that of those who had taken out a payday loan, 60% regret the decision and 48% believe the loan has made their financial situation worse.
Payday Loans Make Situation Worse, Says Report
Half of those taking high interest, short-term payday loans have reported it made their situation worse, according to a study published on Wednesday. The research from insolvency trade body R3 found that of those who had taken out a payday loan, 60% regret the decision and 48% believe the loan has made their financial situation worse.
25 October 2011
Payday Loans Fuel UK Debt Problems Says Charity
Payday loans providing people with last minute cash before their pay check arrives is fuelling consumer debt problems, according to research by a debt charity. The survey by the Debt Advice Foundation (DAF) found 41% of those struggling with debt are saying their financial problems are the result of high-interest ‘payday’ lending schemes.
Payday Loans Fuel UK Debt Problems Says Charity
Payday loans providing people with last minute cash before their pay check arrives is fuelling consumer debt problems, according to research by a debt charity. The survey by the Debt Advice Foundation (DAF) found 41% of those struggling with debt are saying their financial problems are the result of high-interest ‘payday’ lending schemes.
13 February 2009
OFT Consults On Second Charge Lending Guidance
The Office of Fair trading (OFT) today launched a consultation on draft guidance for businesses engaged in second charge lending. Second charge loans, or 'homeowner loans', involve consumers with an existing mortgage taking out further personal borrowing secured against their home.
OFT Consults On Second Charge Lending Guidance
The Office of Fair trading (OFT) today launched a consultation on draft guidance for businesses engaged in second charge lending. Second charge loans, or 'homeowner loans', involve consumers with an existing mortgage taking out further personal borrowing secured against their home.
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