The payday lending industry has been accused of not making enough checks to ensure it is lending responsibly. Credit reference agency Equifax has issued an alert that some payday lenders are failing to record all their lending transactions. This means that when other lenders come to check the credit files of applicants they may not be seeing all clients' borrowings.
"Sharing data about customers' payment behaviour would enable payday lenders to check they are not lending irresponsibly to people who have multiple loans and who are rolling debt over from one payment period to the next," said Neil Munroe, the external affairs director at Equifax.
"But, as importantly, when the data is made available to mainstream lenders, it will help to rehabilitate the credit records of higher-risk borrowers who repay their payday loans on time," he added.
The payday lending industry is being investigated by the Office of Fair Trading over its lending practices and very high charges. Interest on the short-term loans can be as high as 4,000 per cent and firms have been accused of targeting the young and trapping customers in a debt-ridden lifestyle.
MPs on the Business, Innovation and Skills Select Committee recently said that payday lenders should record all transactions on a shared database so that consumers' credit histories can be accurately monitored.