Curb ads for payday loans, urges poverty minister
Britain's only poverty minister will today demand strong action to curb payday lenders who prey on vulnerable people.
Huw Lewis, Wales's Minister for Tackling Poverty, has today written to the Office of Fair Trading to ask for stricter controls on advertising from the £2bn payday loan sector.He believes the sharp business practices of unscrupulous lenders can trap people into a spiral of debt.
Mr Lewis warned: "Many payday lenders do not comply with basic compliance requirements, such as assessing the affordability of a loan for an applicant. This squeezes more responsible lenders out of the market and allows unscrupulous ones to take advantage of people who are often in dire financial situations."
He said the "relentless" advertising from payday lenders "inappropriately targets the most vulnerable people living in our society".
Mr Lewis was appointed the UK's first Minister for Tackling Poverty in March. In Wales, he has spearheading a drive to extend the networks of credit unions and advice services, and wants the rest of the country the follow.
"Credit unions can offer an affordable alternative to high cost payday loan companies," he said. "They offer an absolutely critical service and their development is central to our work in tackling poverty and financial exclusion."
The OFT is considering referring the payday loan market to the Competition Commission after its study of 50 major lenders discovered systematic rule-breaking.
"Irresponsible lending by payday lenders is widespread and has its roots in the way competition in the market is driven on speed of decision-making and ease of access rather than price," Mr Lewis said.
The Financial Ombudsman Service yesterday revealed a 75 per cent year-on-year rise in complaints about payday lenders. It said it is finding in consumers' favour in nearly three quarters of the cases.
"Payday loan companies are popping up all over the country with a barrage of advertising," Mr Lewis pointed out. "As the full impact of the UK Government's welfare reforms start to kick in, more and more people will be tempted by these loans to make ends meet."
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