MPs have criticised the Office of Fair Trading’s “timid” approach to the regulation of payday lenders.
In an investigation of the UK’s consumer credit market, the public accounts committee says the regulator has never fined any of the 72,000 firms with consumer credit licences, which includes payday lenders, suggesting a “timid rather than tough [approach] in its enforcement”.
Unscrupulous behaviour from firms in the sector is estimated to cost consumers at least £450m a year.
Although the investigation found evidence of consumer credit licences having been revoked, the occurrences were limited and capable of taking as long as two years to achieve. The current system of revoking licences also fails to prevent “phoenixing” whereby firms set up new firms under a different name in order to re-obtain a licence.
The committee found the OFT does not has a sufficient understanding of the sector and is overly reliant on complaints from consumers and information from third parties.
Your Mortgage Decisions director Martin Wade says: “Banks are not making affordable funding available to their customers who are being forced to go elsewhere. Desperate people make bad decisions. Regulation is the first step but the banks are missing a trick.”