MP hails payday lenders inquiry

The move followed concerns from the Office of Fair Trading (OFT) that consumers who cannot afford to pay their loans back on time are finding themselves trapped with one firm when their loans are rolled over.

It was also worried that firms are emphasising the speed of the loan over cost while the pressure to hand loans out quickly may encourage lenders to “skimp” on affordability checks.

Sheffield Central MP Paul Blomfield has tabled a Private Member’s Bill in the Commons aimed at restricting the way they advertise and forcing them to give customers clearer information.

He said: “This is a very welcome decision by the OFT and it adds to the growing pressure to regulate payday money lenders.

“Payday lenders are targeting vulnerable people and their massive interest rates, rip-off charges and misleading advertising often just lead to people being pushed further into debt.”

The Competition Commission has the power to ban or limit products offered by payday lenders or shake up the sector.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), which represents the industry, said: “The OFT’s report acknowledges that those lenders that have been raising standards and complying with the regulation have actually put themselves at a competitive disadvantage.

“However, the CFA has always supported well-designed, well-implemented regulation in order to protect consumers and drive up standards.”