The Office of Fair Trading has launched an extensive review of the payday lending sector. This is in part prompted by concerns that some payday lenders may be taking advantage of people in financial difficulty.
The review will investigate compliance with the Consumer Credit Act and the OFT’s guidance on irresponsible lending, according to Philip Wild a partner in the Company & Commercial Dept. at Kiss Rapinet’s London office: ” Evidence gained during the review will be used to boost standards across the sector and to drive out companies that are not fit to hold consumer credit licences.” The review will involve on-site inspections of 50 major payday lenders and surveys of industry and consumer organisations.
There are a number of issues of concern that the OFT will focus on during the review, including:
Giving loans without first checking adequately that the borrower can afford to repay them.
Inappropriately targeting particular groups of people with clearly unsuitable or unaffordable credit.
Rolling over loans so that charges escalate and the loans become unaffordable.
Not treating borrowers that get into financial difficulties fairly.
The OFT is also advising people who decide to use a payday loan to make sure they understand the costs and charges first.
Philip Wild comments: “There is concern that some payday lenders are taking advantage of people in financial difficulty, in breach of the Consumer Credit Act and not meeting the standards set out in the OFT guidance on responsible lending. There are also issues over compliance with distance selling laws where loans are arranged over the internet.”
People who are worried about their financial circumstances should seek independent debt advice.
If you feel you may need advice, either as a borrower or as a payday loan provider concerned to ensure compliance with the law, Kidd Rapinet can advise you on the latest law in this field. Call Philip Wild on 020 7265 5463 for further information.