Consumer watchdog to investigate payday lenders
The Office of Fair Trading will also write to all 240 payday lenders highlighting its emerging concerns over poor practices in the sector.
David Fisher, OFT Director of Consumer Credit, said: “We have uncovered evidence that some payday lenders are acting in ways that are so serious that we have already opened formal investigations against them.
“It is also clear that, across the sector, lenders need to improve their business practices or risk enforcement action.”
These actions are being taken as part of the OFT’s review of the payday lending industry and its practices.
The watchdog will check areas of concern raised over:
• the adequacy of checks made by some lenders on whether loans will be affordable for borrowers
• the proportion of loans that are not repaid on time
• the frequency with which some lenders roll over or refinance loans
• the lack of forbearance shown by some lenders when borrowers get into financial difficulty
• debt collection practices
Fisher added: “Our report shows that a large number of payday loans are not repaid on time. I would urge anyone thinking about taking out a payday loan to make sure they fully understand the costs involved so they can be sure they can afford to repay it.”