This week, I have called for the Office of Fair Trading (OFT) to introduce the ‘power to suspend’ unscrupulous companies operating in the lucrative payday lending industry.
I have made a submission to the OFT’s Review of the Payday Lending sector including case studies from Wigan based Citizens Advice Bureau and the borough’s credits unions Unify and Welcome.
I have witnessed first hand the the rapid growth of the payday lending industry and over the same period the similar increase in the number of people seeking debt advice as a result of having not just one, but numerous payday loans, easily taken out and with limited affordability checks by the lending company.
I accept that there is a role for payday lenders to play in the finance industry, but I am calling for a much tougher approach to applying existing regulation as well as introducing measures to take account of the methods employed by the industry, such as instant online decisions and loans by text message.
My call for action includes:
• The OFT to be given the power to suspend companies from trading, which they are confident, have been in breach of current guidance.
• Raising the bar for entry into the industry, as it is currently too easy for these companies to obtain licenses to trade.
• The creation of a database of real time credit information to combat ‘spiralling debt’ faced by many consumers when multiple loans are provided to customers, by different companies and in a short space
The next two years will be an extremely difficult period as the transfer of powers from the OFT to the Financial Conduct Authority (FCA) takes place. This has the potential to create a ‘wild west’ style scenario of payday loans companies benefitting from the inevitable confusion and uncertainty in the cross-over period.
I do believe that the way the industry is currently operating penalises vulnerable consumers. Voluntary regulation has failed miserably and now is the time for the OFT to be given the power to crack down on the irresponsible actions of an industry making huge profits on the back of vulnerable and low income borrowers.