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    Payday Lending Firms Face Investigation

    Sky News – Fri, Feb 24, 2012

    The consumer watchdog has launched an "extensive" investigation over concerns that some payday lenders may be taking advantage of people in financial difficulty.

    As part of the review by the Office of Fair Trading (OFT), 50 of the biggest players in the industry will face spot inspections.

    Increasing pressure on household finances has helped fuel the rise of short-term, high-interest lenders but the OFT is concerned that some people are being given loans without the proper checks being carried out.

    It will investigate whether firms target people unsuitable for credit, or roll over the loans so that the charges escalate to the point where they become unaffordable.

    The OFT's director of consumer credit David Fisher said: "We are concerned that some payday lenders are taking advantage of people in financial difficulty, in breach of the Consumer Credit Act and not meeting the standards set out in our guidance on irresponsible lending. This is unacceptable.

    "We will work with the trade bodies to drive up standards but will also not hesitate to take enforcement action, including revoking firms' licences to operate where necessary."

    The regulator has already written to several financial trade bodies about concerns over payday lenders' advertising standards after assessing 50 websites.

    The Consumer Finance Association (CFA), which was one of the trade organisations contacted and represents several large payday lenders, said the OFT's approach was "absolutely right".

    Chief executive John Lamidey said: "We have to identify areas of malpractice and stamp it out. We know that there are payday lenders around who are less than transparent in their advertising and do not carry out the right levels of financial checks, in fact some of them brag about that. 

    "But they are not and will never be members of the CFA." 

    "Research shows that payday loans have a valuable role to play in today's society and meet a real need for consumers who like the short-term, limited nature of the loan and want to avoid borrowing larger amounts over long periods of time.

    "So the OFT's review, by clamping down on poor quality payday lenders, will be good for consumers and good for our industry."

    The Consumer Affairs Minister Norman Lamb has also welcomed the review.

     

    14 comments

    • sawnoff
      sawnoff  •  3 months ago
      The TV companies profit from advertising this immoral product which charges over 1750% interest on shark type loans to poor people. wonga --#$%$ more like. The government and legal professions also profit.
    • testytom
      testytom  •  Tonbridge, England  •  3 months ago
      ALL of these lenders should be shut down. They all charge extortionate rates of interest and excuse themselves by claiming that the rates are not relevant because the period of the loans is shorter than a year. This is nonsense; the capital is on loan throughout the year albeit to different borrowers. Wonga, for instance have an annual rate of more than four thousand percent!
      Close them all down now.
    • David
      David  •  Madrid, Spain  •  3 months ago
      No-one should be allowed to charge that rate of interest, even credit card charges are OTT considering the transaction charges drawn simply by use. 1% more than bank loans I can understand (and bank loans are considerably higher than BoE rates). They should NEVER have been given the chance to operate or gain a business licence.
    • David
      David  •  London, England  •  3 months ago
      'The OFT's director of consumer credit David Fisher said: "We are concerned that some payday lenders are taking advantage of people in financial difficulty' - duh, that is the business model! Only people who are stupid and / or desperate would consider these loans.
    • Dr Redthumb
      Dr Redthumb  •  3 months ago
      Some?

      What planet are they on?

      Taking advantage of people in financial difficulty is the entire business model of this kind of firm.
    • The Witness
      The Witness  •  3 months ago
      Taking advantage? No #$%$ Sherlock!
    • Dreamer
      Dreamer  •  3 months ago
      It's not lending, it is usury.
    • malcolm
      malcolm  •  Bath, England  •  3 months ago
      So loan sharks have gone public and become respectable ? I don't think so. Close them down and treat them like any other greedy and despicable bully boys who take financial advantage of desperate people. The world is a better place without these vile parasites.
    • TellyAddict
      TellyAddict  •  Twickenham, England  •  3 months ago
      These people are pure and unadulterated filth. Why are they allowed to ply their wares on national TV? Poor folk need to wise up and contact credit unions which will lend them money on low rates and now apparently will give lenders a decent return too.
    • Tricky-Nicky
      Tricky-Nicky  •  Peterborough, England  •  3 months ago
      "payday lenders may be taking advantage of people in financial difficulty" No #$%$ Sherlock! With interest rates in the thousands, very little, or no background checks, benefit cuts, wage freezes, job loses & people in poverty on the increase, what overpaid, common-sense lacking, OFT idiot came to THAT conclusion!????? A 10 year old could have told anyone that!!!
    • cru
      cru  •  3 months ago
      Remember camoron and his goverment has put millions on the breadline, they have no choice but to use these crooked firms.
    • Groblich Magflurg
      Groblich Magflurg  •  Edinburgh, Scotland  •  3 months ago
      The consumer watchdog has launched an "extensive" investigation over concerns that some payday lenders may be taking advantage of people in financial difficulty.
      REALLY ?? well well now who would have thought . So how much public money is going to be frittered away on something we already know .
    • gerwyn
      gerwyn  •  3 months ago
      About bloody time to.This is nothing more than highway robbery & those that take it MUST be either Dim or REALLY DESPERATE.....
    • Mike Smith
      Mike Smith  •  Manchester, England  •  3 months ago
      I agree some of those payday lenders are a disgrace but what about some personal responsibility?It seems to me too many people whinge about extortionate interest rates but no one forced them to take out the loans.Its about time people stopped whingeing and took responsibility for there lives.
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