CALLS to ensure payday lenders record all transactions on a database to prevent consumers taking out multiple loans have been criticised by the Consumer Finance Association, which says it will be “expensive to deliver and maintain”.
The report from MPs called for tougher action to clamp down on “opaque and poorly regulated” commercial debt management companies and payday lenders.
John Lamidey, chief executive of the Consumer Finance Association, said: “The CFA welcomes any move which promotes best practice and responsible lending in the payday industry, so we fully support the recommendations in the report.”
But he said that “significant progress is already being made to improve standards in the industry through other research and governmental reviews that are currently underway and that the report’s recommendations need to be considered in the context of these developments”.
In its report, the Business, Innovation and Skills (BIS) Committee called for greater transparency from companies turned to by consumers to help them “make ends meet” after seeing their household budgets squeezed by high living costs and deteriorating employment conditions.
The Debt Management report urged the Government to limit the rolling over of payday loans and ensure lenders record all transactions on a database after taking evidence that some consumers have more than 20 such loans.
But the CGA said it is concerned that “no attempt has been made to measure the hoped-for consumer benefits against the costs”.
Mr Laimdey said: “Implementing a database which requires payday providers to record all of their transactions in order to prevent consumers taking out multiple loans, will be expensive to deliver and maintain.
“This could push up the cost of loans and make loans unavailable to some consumers, yet there remains no data of academic quality proving the positive impact of databases. Simply removing access to payday loans does not remove a consumer’s need for credit.
“Indeed, evidence from the US shows that consumers in database states might borrow less, but they also suffer from expensive overdraft charges, unpaid bills or worse, use of illegal money lenders.”