OFT to review Payday loan lending

The Office of Fair Trading has announced that they are to conduct a review into the PayDay loan market and the practices of PayDay Loan Lenders. The review will focus on compliance with the Consumer Credit Act and the OFT's guidance on Irresponsible Lending. Their specific concerns include:

• Lenders giving loans without checking the client's ability to repay
• Lenders inappropriately targeting clients with unsuitable or unaffordable credit
• Rolling over of loans such that they become unaffordable
• Not treating borrowers that get into difficulties with fairness

The review will consist of an analysis of 50 lenders as well as Consumer and Industry organisations. As much of this industry operates online, websites will also be examined and leading up to this review the OFT has looked at 50 major websites and written to Industry organisations outlining where it thinks advertising standards could be improved. David Fisher, OFT Director of Consumer Credit, said: 'We are concerned 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 our guidance on irresponsible lending. This is unacceptable. We will work with the trade bodies to drive up standards but will also not hesitate to take enforcement action, including revoking firms' licences to operate where necessary. 'The payday sector has grown considerably since the OFT's high cost credit review in 2010. This, combined with the current tough economic conditions makes it the right time for us to review the industry and improve protection for consumers.' This review follows on the review of Debt Management Services companies in 2010 that led to 43 firms surrendering their license and a further 13 having action taken against them to have their licenses revoked so it will certainly be a very serious inspection of the Payday Advance loan industry, not to be taken lightly. At Choice Loans we welcome the review and are pleased that steps are being taken to improve overall industry standards, We have never charged any upfront fees for PayDay Advance loans (or any consumer loans) so we will be pleased if this and other questionable practices are rectified for the consumer's benefit.