OFT investigating payday lending practices

Payday lenders being investigated

The Office of Fair Trading is formally investigating debt collection practices of several payday lenders and has written to all 240 lenders raising concerns over poor practices in the sector (view press release).

As part of its compliance review, the OFT is continuing to gather and analyse information regarding how payday lenders are operating, and will require lenders to provide independent audits to verify that they have improved their practices and procedures to comply with legal obligations and expected standards.

The OFT has highlighted concerns about the adequacy of checks made by some lenders on whether loans will be affordable for borrowers; the proportion of loans that are not repaid on time; the frequency with which some lenders roll over or refinance loans; the lack of forbearance shown by some lenders when borrowers get into financial difficulty and debt collection practices. Its emerging findings are based on sources that include a ‘sweep’ of the websites of 50 payday lenders; 686 consumer complaints; a mystery shopper exercise that involved 156 online and high street lenders and 1,036 responses to a survey of businesses, trade associations and consumer bodies.

The full report will be published in the New Year. 

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