OFT launches inquiry into short term loans operations

The Office of Fair Trading is about to begin an inquiry into the goings on of the short term loans industry, which has grown phenomenally over the last few years and is now worth a billion pounds a year.

The inquiry will focus on claims that a number of short term loans companies are pushing their loans on all and sundry and driving some people into debt. More specifically, the inquiry will focus on several contentious issues which have involved practices observed with some short term loans companies.

The controversy has surrounded those firms that lend money to people without checking on their ability to pay back the loans sufficiently, as well as encouraging unpaid loans to be rolled over, all at very high interest rates.

There is also some evidence that there has been heavy handed treatment in the event that borrowers get into difficulty.

The office of fair trading has put out a warning to the industry that where lenders have been recklessly lending money out to people who obviously cannot pay it back may have their licences revoked.

The rise in short term loans influence has come at a time when the British economy is in the doldrums and many people have seen their pockets squeezed more than at anytime in the last 60 years. Payday loans companies say they have received huge numbers of applications to cover the cost of everyday bills such as rent, mortgage payments and heating and power bills.
Critics of the industry, however, claim that their smart, glossy looking websites promote instant cash loans for things like cosmetic surgery and holidays.

The OFT’s inquiry will survey the dealings of at least fifty of the major short term loans lenders. David Fisher, the OFT’s Director of Consumer Credit, said that the inquiry had been launched because of the office’s concerns that some in the industry had been taking advantgage of people in financial difficulty and had not been adhering to the office’s standards for responsible lending.

He said that irresponsible and reckless lending was completely unacceptable and would not be tolerated. Any companies that were found to be involved in irresponsible lending would have their licences revoked. At the same time the office had no qualms about working with the industry to raise the bar on responsible lending practices.

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