The Office of Fair Trading (OFT) has asked for a review into competition among payday lenders, after finding evidence a lack of choice means firms are profiting from loans that can't be paid back on time.
The OFT said it was difficult for customers to identify and compare the cost of loans, that not all firms complied with relevant laws and that a significant proportion of borrowers had poor credit histories and limited access to other forms of credit. It said lenders were competing primarily on the availability and speed of loans rather than on the price of paying them back.
In March, the OFT gave Britain's biggest 50 payday lenders 12 weeks to change their business practices or risk losing their licenses after finding evidence of widespread irresponsible lending. It said it had so far received responses from only 20 of the lenders, five of which have stopped offering the loans.
Payday lenders are dangerously quick to hand out loans in minutes without proper affordability checks being made. The industry is full of predatory firms who have no moral compass and think only of the bottom line regardless of the detriment they cause to many people.
Voluntary Regulation and industry wide codes of practice have failed spectacularly and Government must now act to ensure that statutory regulation is introduced as soon as possible.