Payday loans - fair by trade, not by nature

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Payday loans - fair by trade, not by nature

20th May 2010

The office of fair trading seeks review of hefty payday loans

Figures from the Office of Fair Trading have revealed that the consumer credit sector is worth 35 billion per year and that they are to review the sector’s activity, particularly when it comes to payday loans.

The OFT fears that there is too much competition in the market and in some cases the competition between businesses is not benefitting the customer like it usually would.

It comes as the OFT confirmed their worries that the most financially vulnerable people, those with bad credit, were taking payday loans which in some cases were the most financially unpractical and risky - loans of small amounts of money that are attached to a high APR.

John Fingleton is the chief executive of the Office of Fair Trading, who are conducting the study. He said that the objective of the study was to see if consumers were getting the services and support they need in these recessionary times.

He added: “Low income consumers struggle to access credit and frequently have to resort to expensive, high interest options, and this has increasingly been an issue during the economic downturn. These consumers are vulnerable to exploitation.”

The thorough investigation of the industry will compare practices here with similar practice in other countries around the world. Experts, government agencies and consumer champion agencies will also be involved in the study.

Some of the other key focuses of this study is to see whether or not consumers have the right amount of protection in the market and will also analyse the behaviours and usual choices of those who are seeking credit.

Mr Fingleton elaborated further on the study’s purpose: “This study will look at the way this sector works to examine whether they get a fair deal, and whether outcomes in the market might be improved.”

The results will be hoped to help consumers with bad credit have better consumer confidence and will also seek the companies that provide payday loans to change their protocols if it is believed that their practices are unfair.

So far, it is understood that any conclusive information about the study is a while off. The recent confirmation of the study means that any findings that come as a result of this study will be published towards the end of this year. Current estimates predict that Spring 2010 will be the date when the final report is released.

Posted in Payday loans

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