OFT launches inquiry into payday loans
Watchdog to investigate claims that lenders target benefit claimants who can't afford repayments
The Office of Fair Trading has finally agreed to investigate the payday loans industry after a long-running campaign by The Independent and others.
The OFT will probe accusations that high-cost, short-term lenders prey on vulnerable people, such as the unemployed or those on benefits.
It will look into claims that they are irresponsible and hand out loans without checking whether borrowers can actually afford to repay them.
It will question payday lenders about how they treat borrowers who get into difficulties amid growing evidence that they do not treat them fairly.
Finally, it will focus on the practice of rolling over loans, so that those who fail to repay on time quickly end up with unaffordable rising debt.
David Fisher, the OFT's director of consumer credit, said: "We are concerned that some payday lenders are taking advantage of people in financial difficulty."
The OFT will review 50 major payday lenders, and could shut down those it finds are operating irresponsibly. However, it refused to name the lenders it will investigate.
The Labour and Co-operative MP Stella Creasy has led a campaign to end legal loan sharking since last year.
"I'm glad the OFT has finally admitted there's a problem, but its investigation won't solve things," she said. "We need stronger regulations. The current law is too weak. The point with the payday loans industry is that there is so much money to be made that as soon as you crack down on one rogue firm, another simply takes its place." Yesterday Ms Creasy visited a branch of the Cheque Centre, which has just opened in her Walthamstow constituency, the 11th high-cost credit lender in the area.
"I will be reporting them to the OFT as they fail to publish the cost of credit – the APR – anywhere at their branch," she said.
The Labour MP Yvonne Fovargue, chair of the All-Party Group on debt and personal finance, welcomed the OFT investigation. "Payday lending has become a rising problem, with more people looking at the loans as an easy was to escape a short-term problem but quickly ending up in a spiral of debt," she said. "I hope the OFT will recommend that regulation is necessary.
The Independent reported last month that the online payday lender Wonga was forced to remove an article from its website that suggested students should take out expensive payday loans rather than using government-backed Student Loans, which charge around 5 per cent rather than 4,000 per cent.
The OFT has promised to report back on its investigation later this year.
Loans by numbers
4,000%: Typical APR charged by payday lender
1,000: Complaints about payday lenders every year to the ombudsman
50: Payday lenders are to be reveiwed by the OFT – those found to be lending irresponsibly could be closed
A History of the First World War in 100 moments: The mutiny that sent a ripple of fear through the Empire
LAPD releases haunting crime scene photos from its archives
Peaches Geldof funeral: Bob Geldof leads tributes at emotional service in same church she married husband Thomas Cohen and mother Paula Yates was buried
Malaysia Airlines flight MH370: Concerns grow among search officials that missing jet ‘may have landed somewhere else’
50-year mystery of the ocean ‘quack’ finally solved by scientists
Ukip election posters: Nigel Farage defends 'racist' campaign anti-immigration campaign ahead of Europe elections
Ukip leader Nigel Farage defends employing German wife, at launch of anti-immigration poster campaign
Is Britain really a land of God? Furious debate after David Cameron claims we are a Christian country
An open letter to Nigel Farage: you may smile, but I am not seduced
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
Nigel Farage: Calling Ukip’s posters ‘racist’ is yet another example of shameful Westminster evasion
- 1 William Shakespeare's 450th birthday: 50 everyday phrases that came from the Bard
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Man gives barefoot bus passenger the shoes off his feet
- 4 Malaysia Airlines flight MH370: Concerns grow among search officials that missing jet ‘may have landed somewhere else’
- 5 50-year mystery of the ocean ‘quack’ finally solved by scientists
iJobs Money & Business
£80000 - £120000 per annum + Highly Competitive Salary: Austen Lloyd: US QUALI...
Highly Competitive Package: Austen Lloyd: INTERNATIONAL BANKING Banking Solici...
£20000 - £28000 per annum: Harrington Starr: Data Quality Analyst-(SQL, Excel,...
£90000 - £110000 per annum + full Package: Harrington Starr: Director of Cons...