Loan & Finance Blog ? Warning issued to payday loan firms

November 22, 2012 at 6:35 pm ? Filed under Banks & Banking

The Office of Fair Trading has issued a warning to payday lenders in the UK, demanding that they improve the way in which they lend and collect money or face the consequences. Those failing to heed the warnings could face hefty fines or could even be closed down by regulators. The warning comes amidst continued concerns over the hefty fees and interest rates that many payday lenders charge and the lack of scrutiny over checks that are being carried out.

The OFT has been inspecting 50 big payday lenders across the UK and has now released an interim report suggesting that the majority of the payday companies it has investigated are failing to fully operate by the rules. The watchdog has also stated that it has concerns over the reckless way in which some payday lenders are doling out money and by the aggressive tactics being used to get the money back from struggling borrowers.

With more and more people being forced into taking out payday loans due to their financial situations, dealing with issues within the industry has become a higher priority for regulators and watchdogs. The investigation will come to an end early next year, which is when the OFT will publish a full report.

David Fisher, the OFT?s director of consumer credit, expressed concerns over the state of the industry, saying that problems existed across the whole sector and that the whole payday lending industry needed to ?raise its game?. He also estimated that ?1.8 billion per year was now being lent by the payday industry, which was double that being lent two years ago.

According to reports, the OFT has raised concerns about the poor practices that are being employed by many payday lenders ? practices that have also been highlighted by various consumer campaign groups. This includes practices such as failing to check whether borrowers can afford to repay the loan, extending loans too regularly, and being too aggressive with borrowers that are unable to repay the loan on time. The OFT said that its revised guidelines made its expectations perfectly clear for payday lenders.

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Source: http://www.loans4.co.uk/blog/?p=1711

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