Business

Regulator hails 'significant' departures from lending market

Payday lenders are leaving the market after an investigation by the Office of Fair Trading (OFT).

BBC Radio 4's You and Yours reported that some stopped lending voluntarily, but three had their licences revoked.

The OFT's March inspection of 50 firms found widespread irresponsible lending.

Two companies surrendered consumer credit licences. The Payday Loan Company said it left the market before the inspection, but Anfield Cheque Cashing Centre declined to comment.

The investigation by the regulator uncovered "deep-rooted" problems in how the firms competed with each other, as well as evidence of widespread irresponsible lending.

The biggest lenders were advised individually on areas of improvement and given until the end of this month to respond - or risk losing their licences.

David Fisher, senior director of consumer credit at the OFT, said: "People have strong views about the rights and wrongs of the payday sector, but the fact is there is very little evidence. That's why we conducted our own investigation."

Describing decisions by firms to leave the market as "very significant", he said they were a direct response to the pressure that the OFT had put on lenders to raise their game.

Poor

In addition to the original investigation into the top 50 lenders, the OFT has revoked the licences of three other firms. Mr Fisher explained some of the practices uncovered were so poor that innocent consumers had no knowledge loans were being fraudulently taken out in their names.

In another instance, an associate of one payday lender had convictions for fraud and violence which had not been disclosed to the regulator.

From April next year, the OFT will cease regulating payday loan companies. Responsibility will pass to the Financial Conduct Authority.

Consumer Minister Jo Swinson chaired a payday loans summit with lenders, charities and the OFT on 1 July.

It was the first time all parties had been under one roof discussing how to improve accountability for customers.

She said: "The message to the industry was absolutely clear. They are already facing tough regulation and they've got much tougher action coming down the track."

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