The Office of Fair Trading (OFT) has today warned that a handful of payday lenders could have their credit licenses revoked because of unacceptable and aggressive debt collection tactics.
The OFT has announced that it has written to all 240 of the registered payday lenders it has on its list as operating in the UK payday loan market, to tell them about their individual failings as part of their review into the payday lending industry.
The OFT has requested that the lenders consider how they collect debts from customers, especially concerning CPA (continuous payment authority), which allows them to take money out of peoples accounts at will.
The full report from the review into the short term lending industry is due to be published in early 2013. As of yet firms facing formal investigations have not been named. It is also unknown at this time how many face investigation.
The OFT has also said that lenders should check to make sure that they fully comply with the regulations. They should also be looking at being more active in checking whether loans are affordable to the borrowers.
Policing the payday loan industry is also made more difficult because many loan companies buy their leads off of marketing websites posing as lenders. The OFT said that it is part of the licensing conditions that companies can only use leads generated in ways that are compliant with the rules.
David Fisher, OFT director of consumer credit, said: ‘We have uncovered evidence that some payday lenders are acting in ways that are so serious that we have already opened formal investigations against them. It is also clear that, across the sector, lenders need to improve their business practices or risk enforcement action.
‘Our 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.
‘Our revised guidance makes it absolutely clear to lenders what we expect from them when using continuous payment authority to recover debts and that we will not accept its misuse.’