Local authorities should block access to payday loan websites from council computers in a bid to protect vulnerable residents, according to a Willaston and Rope Ward Councillor. Brian Silvester is calling for access to payday loans. Yesterday, Citizens Advice issued a warning over payday lenders’ after finding three out of four people struggled to repay the loan. It is urging the OFT to immediately ban these lenders, saying they are causing real harm to borrowers. http://www.localgov.co.uk/index.cfm?method=news.detail&id=109944
The Office of Fair Trading admits it “lacks regulatory powers” as it is slammed by MPs for failing to protect consumers from “predatory” lenders. http://www.channel4.com/news/payday-loan-regulator-lacks-power-to-tackle-predators
The OFT has opened formal investigations into several payday lenders over aggressive debt collection practices. It is also today writing to all 240 payday lenders highlighting its emerging concerns over poor practices in the sector.
These actions are set out in a progress report published today as part of the OFT’s compliance review of the payday lending sector. It highlights concerns about:
- the adequacy of checks made by some lenders on whether loans will be affordable for borrowers
- the proportion of loans that are not repaid on time
- the frequency with which some lenders roll over or refinance loans
- the lack of forbearance shown by some lenders when borrowers get into financial difficulty
- debt collection practices.
The OFT is continuing to gather and analyse information about the activities of payday lenders as its compliance review progresses. It also expects to warn the majority of the 50 firms inspected, which account for the majority of loans, that they risk enforcement action if they do not improve specific practices and procedures which came to light when they were inspected. The OFT will require those lenders it warns to provide it with independent audits to verify that they have improved their practices and procedures to comply with legal obligations and expected standards.
The emerging findings are based on information from a wide range of sources, including:
- a ‘sweep’ of the websites of 50 payday lenders
- a programme of inspections of over 50 individual lenders
- 686 consumer complaints
- a mystery shopper exercise involving 156 online and high street lenders
- 1,036 responses to a survey of businesses, trade associations and consumer bodies.
‘They have uncovered evidence that some payday lenders are acting in ways that are so serious, that they have already opened formal investigations against them. It is also clear they have said, that across the sector, lenders need to improve their business practices or risk enforcement action.
‘Their report shows that a large number of payday loans are not repaid on time. I would urge anyone thinking about taking out a payday loan to make sure they fully understand the costs involved so they can be sure they can afford to repay it.
‘Their revised guidance makes it absolutely clear to lenders what they expect from them when using continuous payment authority to recover debts and that we will not accept its misuse.’
The Consumer Credit Act 1974 requires most businesses offering credit, lending money or involved in activities relating to credit or hire, such as debt collectors, to be licensed by the OFT. The OFT produces guidance to clarify its expectations of those companies and individuals that hold a consumer credit licence. Failure to have regard to OFT guidance can call into consideration the business’ fitness to hold a consumer credit licence.
The consultation sets out the OFT’s proposed objectives and priorities over the next financial year, its fortieth and final year before the transfer of functions to the Consumer and Markets Authority and the Financial Conduct Authority. The OFT intends to continue to focus on work to make markets work well for consumers and the wider economy, alongside ensuring a rich portfolio of cases is handed over to the new institutions.
The proposed areas of focus are informed by the OFT’s first published Strategic Assessment, which identifies key developments and trends in the macro-economic, regulatory, political and social environment – such as economic challenges, demographic change and technological advances. It considers risks to consumers and markets in this context, taking into account the probability of problems arising and impact, should they occur.
During 2013-14, the OFT plans to prioritise work that reflects the following themes:
- vulnerable consumers and consumers challenged by the adverse economic climate
- pricing used as a barrier to fair choice
- novel and developing markets and business practices
- public services markets
- closer working with the economic regulators.
These priorities have been developed in the context of a challenging economic climate and are designed to maximise impact against the backdrop of a reduced OFT budget.
‘In the coming financial year, we will remain focused on delivering outcomes that matter for the consumer and the economy, while also preparing the ground for the transfer of the OFT’s functions and the establishment of the new institutions. Publishing our Strategic Assessment of Risks alongside the Annual Plan consultation makes clear the thinking behind our choice of themes and priorities.’