Two out of five payday firms close after probe

Another four payday lenders have shut their doors, the Office of Fair Trading (OFT) revealed this week.

Since the watchdog launched an investigation into the biggest 50 high-cost credit firms earlier this year, 19 have closed down.

In addition, three firms engaged in payday lending have had their licences revoked and another three surrendered their licence.

The news will please Archbishop of Canterbury Justin Welby, who has begun a notable campaign to curb the worst excesses of payday lenders, which charge interest rates of up to 5,000 per cent APR.

Meanwhile, the Competition Commission – which is examining the sector after a referral by the OFT – revealed that payday lenders have seen a fourfold increase in their turnover between 2009-10 and 2011-12.

It said the three largest payday loan companies – Wonga, Cash America (owner of Pounds to Pocket and QuickQuid), and Dollar Financial Corp (owner of The Money Shop and PaydayUK) – have around a 70 per cent share of the market by turnover.

The commission is investigating accusations that lenders don't check whether borrowers can afford to repay loans and encourage struggling debtors to roll over loans in order to increase their profits.

The commission wants to hear views from interested parties by 20 September on whether the issues it has identified should be included in its probe and whether it has missed anything out.

Evidence can be submitted to the investigation by emailing paydaylending@cc.gsi.gov.uk