Providers of instant short term loans will soon face a crackdown from a regulatory body, even as the number of people taking out short term loans to help them pay for their Christmas expenses rises, industry experts recently reported.
In excess of two million Brits are believed to have sought out instant cash loans in the UK, as the economy continues to show signs of sluggish recovery. However, the Office of Fair Trading is poised to pounce on those payday lenders who may be preying on borrowers who cannot afford repay the loans in the first place.
The OFT fears that payday advance lenders will withdraw cash from a customer’s bank account without prior authorisation if the borrower neglects timely loan repayment. This could lead to the customer being hammered by expensive overdraft fees – or worse yet, without the requisite cash to ensure they can put food on their table and keep their lights on, says the regulatory body.
The OFT also said that many of the more vulnerable classes of society are purposely targeted by a select number of payday lenders. Providers that offer instant cash transfers have also come under fire, prompting fears that lenders are accepting applications from individuals without determining if they will be able to make repayments in a timely manner, with part of the investigation of the OFT looking into whether or not lenders are presenting the terms of their loans in a transparent manner.
The regulator is also conducting an investigation of 50 companies who sell payday lenders lists of consumers that may be in need of such a loan. These consumers are then texted or cold-called in an attempt t drive new business, the OFt added.