Paydays lenders face probe by watchdog

The Office of Fair Trading (OFT) will carry out spot-checks of 50 major lenders and said it would look into concerns that people are being given loans without the proper checks being carried out.

It will investigate whether firms target people unsuitable for credit and are rolling over loans so that the charges escalate and they become unaffordable.

The sector has exploded in size in recent years, with new players arriving from the United States. Analysts have suggested that the innovation shown by such lenders could see them eclipsing credit card companies.

Lenders like Wonga.com, the Money Shop and Quick Quid have gained increasingly high profiles to become household names.

The watchdog has not named the firms it plans to investigate but said the “biggest players” in the market will be under the spotlight.

The OFT has already conducted a sweep of more than 50 payday lending websites and written to trade bodies outlining areas where advertising standards must be improved.

OFT director of consumer credit David Fisher said: “We are concerned that some payday lenders are taking advantage of people in financial difficulty. This is unacceptable. We will work with the trade bodies to drive up standards but will also not hesitate to take enforcement action.”