Payday lenders: change or get shut down

The Office of Fair Trading (OFT) said it also wants to refer the entire payday lending market to the Competition Commission after finding deep-rooted problems in how lenders compete with each other.

The watchdog said it had uncovered “widespread irresponsible lending and failure to comply with the standards required” in the £2bn payday lending market.

In its final report on the sector, the OFT said there were problems throughout the lifecycle of payday loans, from advertising to debt collection. It gave the fifty leading lenders, representing around 90 per cent of the market, 12 weeks to take action to address the concerns or risk losing their licence.

wow. just wow. the OFT report a damning indictment of Government failure to regulate legal loan sharks. explosive stuff! #sharkstoppers

— stellacreasy (@stellacreasy) March 6, 2013

Clive Maxwell, OFT chief executive, said: “Irresponsible lending is not confined to a few rogue payday lenders – it is a problem across the sector. If we do not see rapid, significant improvements by the 50 lenders we inspected they risk their licences being removed. Payday lending is a top enforcement priority for the OFT.”

MP Stella Creasy has campaigned to reform payday loans and this morning tweeted: “OFT: ‘We believe that the problems go deeper than a very poor compliance culture” – yes! We need reform now! #sharkstoppers.”

Watch the Channel 4 News investigation into payday loans

Also today, MPs pledged to clampdown on how payday loans are advertised to make sure that firms cannot take advantage of people who are already drowning in debt.

The OFT now invites comments on its payday loans report and expects to make a final decision on referring the payday market to the Competition Commission by June 2013.