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OFT launches investigation into payday lenders


The Office of Fair Trading has opened a formal investigation into the payday lending sector over aggressive debt collection practices and is investigating a number of individual firms after it uncovered evidence of serious misconduct.

The OFT says it expects to investigate a sample of 50 of the 240 active payday lenders in the market by the time it finishes its investigation early next year.

In an interim report, published today, the OFT says it is writing to all 240 payday lenders in the market to highlight its concerns about poor practices in the sector.

The OFT is concerned that lenders are not checking to see if loans are affordable and that some lenders roll over or refinance loans too frequently. It also has concerns about the proportion of loans which are not repaid on time, the lack of forbearance shown by some lenders when borrowers get into financial difficulty and debt collection practices.

OFT director of consumer credit David Fisher says: “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.

“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.”

Concerns were raised after the OFT conducted a “sweep” of the websites of 50 lenders, combined with individual inspections.

The OFT has today published revised debt collection guidance, focusing on continuing payment authority, which the OFT says is a practice that is commonly used in the sector. CPA is similar to a direct debit, except with a CPA companies can take different amounts on dates they choose.

The watchdog is concerned lenders are using CPA without the informed consent of the borrower and are failing to explain adequately how CPA works and how it can be cancelled. It is concerned that some lenders are trying to take payment where there is reason to believe that there are insufficient funds in the account and are not trying to establish why there might be a payment failure.

As a result it has revised its approach to CPA.

While lenders will now no longer be confined to a single use of CPA, as was previously the case, and allows a reasonable number of attempts over a reasonable period, subject to appropriate transparency and forbearance.

The OFT says: “It reaffirms our expectation that lenders will suspend the use of CPA if there is evidence suggesting that the borrower may be in financial difficulty and unable to repay.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. And not before time too, Shocking that the Advertising Standards Authority shows scant knowledge of what is fair and not misleading, and has approved ads that many have raised serious and legitimate concerns over. No Apr shown, ads that are targetted shamelessly at the most vulnerable and least financially able or literate, it is a disgrace this should be allowed to happen, legalised loan sharks on the TV, I only wish they could also ban the Bingo ads as well, people are being encouraged to gamble or borrow what they cannot afford, there is no way proper affordabilty checks and cross referencing can be made, when they promise to have the money in someone’s account in such a short time, there have also been cases of fraud, This needs action quickly !

  2. The OFT wants them to check if borrowers of small unsecured loans can repay them. Good god is there any end to the nannying that officials want from businesses.

    Shut them all down now and force the feckless wastrels to borrow off a shark who drills your kneecaps out if your payments are late. It’s the only way to teach people that loans have to be repaid.

  3. I have seen your site… site is good,,,, if you put more images or photo gallery in it… then will more attractive …. knowledgeable information in site. Thanks for share with us.

  4. I totally agree that terms and regulations MUST be tighten for a lot of lenders as a matter of fact effective immediately. How can they possibly expect people with low income to pay back the interest rate of 400%-1000%? It I just insane! On the other hand: why borrowing from this kind of service if you do not even sure you can actually repay all the amount without getting into debt? It is a logical question we all have to ask ourselves before going to a payday lending store or website. As for collectors…they always were, are and will take a place in life of irresponsible borrowers.
    Mandy from Company Online

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