Five Questions on: Payday lenders

 

Click to follow
The Independent Online

What have they done now?

It's what they're going to have to do. After a 20-month investigation, the Competition and Markets Authority (CMA) this week told lenders to publish their rates and, crucially, the total amount payable on loans on a price-comparison website.

How will that help?

The CMA says it will lead to lower charges. Simon Polito, chairman of its Payday Lending Investigation Group, said: "We want to ensure that customers are able to take advantage of price competition to further reduce the cost of their loans. Only price competition will incentivise lenders to reduce the cost that borrowers pay."

Is that enough?

No, said Martin Lewis of the consumer website Moneysavingexpert.com. "This is a rather flaccid response by the CMA. To lead on 'payday loan price comparison' seems to indicate it doesn't really understand the payday loan environment." The Debt Advice Foundation's chief executive, David Rodger, also believes that more has to be done "We are still seeing nothing that balances the ruthless marketing of loans to people who need help with managing their finances – not extra debt," he said.

Haven't there been other restrictions forced on the lenders?

Yes. In January the Financial Conduct Authority introduced a price cap, which followed new rules introduced last year. The CMA will also force the lenders to disclose all late fees and other charges, share real-time data, and make the role played by "lead generators" – which account for 40 per cent of all first-time loans – much clearer to consumers. Lenders will also have to give customers a summary of their cost of borrowing.

Won't these tougher rules force some firms out of business?

Some are struggling. This week Wonga announced plans to sack a third of its staff as it restructures its business.

Looking for credit card or current account deals? Search here

Comments