Payday lenders, regulators, charities and government ministers will be brought together on Monday to tackle the problems in the loan industry.
Jo Swinson, the minister responsible for consumer affairs, will host the summit, which comes just days after the sector was referred for an investigation.
The Office of Fair Trading (OFT) referred the £2bn industry to the Competition Commission last Thursday, saying it fears that consumers who cannot afford to pay their loans back on time are finding themselves trapped with one firm when their loans are rolled over.
It is also worried that payday loan firms are emphasising the speed of the loan over cost and that lenders may be “skimping” on affordability checks.
Up to half of lenders’ revenues were found by the OFT to come from the extra charges and interest coming from loans being rolled over. The Commission’s investigation will take up to 18 months and it has powers to ban or limit products.
The payday sector has come under heavy criticism from debt charities, which have accused lenders of being “out of control”.
Ahead of the summit, Richard Lloyd, executive director of Which?, said the consumer group wanted to see more action from Government to tackle the “toxic market”. He said: “We want new rules banning excessive charges, a restriction on the number of times a payday loan can roll over and clearer advertising.”
Payday lenders argue that they have worked to clean up their act, including the introduction of a new code of practice last year to ensure loans are affordable.Reuse content