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Payday loan lenders leaving industry

Payday loan lenders leaving industry

Category: Loans

Updated: 15/08/2013
First Published: 15/08/2013

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 It is now over 6 months old so the content may be out of date.

More than one in three of the payday lenders ordered by the Office of Fair Trading (OFT) to prove their practices are up to standard have since exited the industry.

The announcement came from the Competition Commission, which was handed the task of investigating the industry by the OFT at the end of June

Nineteen of the 50 firms under investigation have since left the industry.

The commission also revealed the three firms which control 70% of the payday loans market by turnover.

These are Wonga; Cash America, which trades under the names of Pounds to Pocket and Quickquid; and Dollar Financial Corp, which owns PaydayUK and The Money Shop.

The payday loans industry has come under fire over recent months, being accused of charging sky-high interest rates, often to those who can least afford it, whilst also using unscrupulous practices to get their money back when customers fail to pay.

Findings of the OFT report included:

• A majority (68%) of loans are repaid on time, 18% late and 14% never repaid.

• The average payday loans is between £265 and £270.

• Assuming that loans were repaid on time, costs were on average £25 per £100 borrowed for 30 days.

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.

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

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