What led to the OFT investigation of payday advance lenders?

In the wake of the Office of Fair Trading’s announcement that it will be investigating payday advance lenders, many instant cash loans industry experts have begun to take a closer look on the leading causes of the move by the watchdog agency.

The OFT has said its review was caused by fears that some Brits facing financial difficulties may be falling afoul of rogue instant cash loan firms who seek to prey upon the misfortune of these individuals.  There are four main issues the OFT is focusing on in its investigation, among them the practice of granting loans to borrowers that may not be able to repay the cash, targeting particular classes of people in an inappropriate manner with clearly unaffordable or unsuitable credit, escalating charges by rolling over loans and leading to unaffordable debt, and treating borrowers that get themselves into financial difficulty in an unfair manner.

The director of consumer credit for the OFT, David Fisher, said that the watchdog has concerns that there are some lenders that have been breaching the Consumer Credit Act by taking advantage of those facing financial difficulties.  If these firms are indeed neglecting to meet the OFT’s standards it has set out to curb irresponsible lending, this is an unacceptable outcome, Mr Fisher added.

The OFT is committed to working with trade bodies to drive up lending standards, remarked the consumer credit director.  However, Mr Fisher remarked that the watchdog is not afraid to take enforcement action such as the revocation of licences to operate for firms if the OFT deems it necessary to put an end to the practice.

There has been considerable growth in the payday lending sector since 2010, when the OFT last conducted its review of the industry.  This makes it the perfect time for an additional review, said Mr Fisher, especially in light of the current economic conditions.

 

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