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Payday loan crackdown hits industry profits

Payday loan crackdown hits industry profits

Category: Loans

Updated: 27/08/2013
First Published: 27/08/2013

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK's second largest payday loan lender has said years of sky-high growth have come to an end following the crackdown on the industry.

Dollar Financial told its investors that the strict regulation following the Office of Fair Trading's (OFT) probe that will see limits imposed on who can borrow and for how long will cost it up to £10 million a year.

The US-based company owns The Money Shop, Payday UK and Payday Express.

It said its turnover from online lending in Britain fell 2.9% in the three months to the end of June, a huge contrast to the 34% growth over the same period last year.

Two weeks ago, the Competition Commission, which has been tasked with further investigating the industry following the OFT probe, revealed that the three biggest lenders - Wonga; Cash America, which trades under the names of Pounds to Pocket and Quickquid; and Dollar Financial, control 70% of the payday loans market by turnover.

Nineteen of the 50 payday loan lenders ordered by the OFT to prove their practices were up to scratch have since exited the industry.

Dollar Financial said that it predicted even more lenders would leave, with the tighter controls on payday lending making it "inconceivable" for smaller lenders to be able to operate legally.

The Commission's investigation will be concentrating on competition within the industry, looking at the profitability of payday lending and the extent to which the pricing of payday loans can be explained by the costs of providing the service.

It will also be probing how easy it is for consumers to compare payday loans as well as investigating what other choices are available to borrowers.

Provisional findings will be unveiled next summer, with a full report due at the end of 2014.

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