Following a recent case, the OFT has acted against payday loan providers and warned them that they must not misuse direct debit facilities to vary the amount or date of a loan repayment. Philip Wild, a partner in the Company & Commercial Department at Kidd Rapinet's London office says: "Quite clearly some of these payday lending operations need to take more care to stay within the law, and consumers need to know their rights."

Direct debit facilities are used by some payday lenders to give them greater control over the repayment of the short-term loan. This means that if a borrower defaults on the loan, the lender can make multiple attempts to take money from the borrower's account without agreeing specific amounts or dates with the borrower.

The OFT believes that some lenders use this 'continuous authority' as a way to bypass proper checks on a borrower's ability to repay. The OFT is also concerned that taking money from a debtor's account when they are already in difficulty could prevent them from meeting priority debts, such as rent or mortgage payments. Philip Wild comments: "businesses should not include terms in their contracts with consumers that enable the business to vary the date and amount for collection without prior agreement. The OFT considers such terms are likely to be unfair under the Unfair Terms in Consumer Contracts Regulations 1999, as they have the potential to operate to the significant detriment of consumers. For example, where money is unexpectedly taken from consumers' accounts during a time of financial difficulty, consumers may incur additional fees and charges from their bank or financial provider."

We advise people who think they may have been wronged to seek advice from their solicitor, as they can inform you of what options you have. If you feel you may need advice, Philip Wild can advise you on the latest law in this field. Call him on 020 7024 8029 for further information.