MAKERFIELD’S MP has hailed a new move against the controversial pay day loan companies today.
The Office of Fair Trading (OFT) has now asked for a review into competition among back street lenders after finding what it said was evidence of a lack of choice that was allowing such firms to profit from loans that just cannot be paid back on time by struggling clients.
New powers to rein in the socially-destructive activities of such activities have been successfully piloted through Parliament by Yvonne Fovargue who has seen first hand the effects they can have after approaching a quarter of a century as chief executive of a branch of the Citizens Advice Bureau which specialises in debt counselling.
Pay day firms offer short-term loans which are intended to be paid back when borrowers receive their wages.
But Ms Fovargue points out that they charge excessively high interest rates and are increasingly taking advantage of the vulnerable in this economic downturn.
The OFT has now asked the Competition Commission to conduct a detailed investigation into the industry.
It will then be able to use its significant powers, if it deems it necessary, to fix the payday lending market interest rates.
Chiefs at the OFT are concerned about the difficulty for customers identifying and comparing the cost of loans. While not all firms were complying with relevant laws and a significant proportion of borrowers had poor credit histories which gave them very limited access to other forms of credit.
It fears lenders are currently competing primarily on the availability and speed of loans.
In March, the OFT gave Britain’s biggest 50 payday lenders three months to change business practices or risk losing their licenses.
Ms Fovargue, chairman of the All Party Group on Debt and Personal Finance, said: “Payday lenders are dangerously quick to hand out loans in minutes without proper affordability checks being made. The industry is full of predatory firms who have no moral compass and think only of the bottom line regardless of the detriment they cause to many people. Voluntary Regulation and industry wide codes of practice have failed spectacularly.
“Government must now act to ensure that statutory regulation is introduced as soon as possible.”