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| Payday lenders are tackled by MPs | |
| (about 1 hour later) | |
| Payday lenders are in dispute with consumer groups over the level of complaints relating to short-term lending. | |
| Consumer groups say complaints are up since the introduction of a charter to ensure loans are made correctly. | |
| But a trade body told MPs that there had only been 36 complaints so far this year. | |
| Payday lending is being put under the microscope by MPs amid a defence from some of the industry's biggest players. | |
| Members of the Business Select Committee are quizzing lenders, consumer groups and a minister about the industry. | Members of the Business Select Committee are quizzing lenders, consumer groups and a minister about the industry. |
| Providers of these short-term, high-interest loans have faced criticism from many, including Church leaders. | Providers of these short-term, high-interest loans have faced criticism from many, including Church leaders. |
| But loan provider Wonga has told the BBC its business practices are being misrepresented. | But loan provider Wonga has told the BBC its business practices are being misrepresented. |
| 'Timid' | 'Timid' |
| The one-off committee session heard from the Consumer Credit Trade Association, which challenged the idea that complaints were rising. | |
| Providers Wonga and Mr Lender said that 2-3% of loans were made to people who then hit financial difficulty. | |
| Henry Raine, head of regulatory and legal affairs at Wonga, said that "compared favourably" with credit card companies and banks. | |
| "We aim to lend to people who can pay us back," he said. "We do everything we can to lessen the load of bad debt." | |
| He added that Wonga's average loan was £176 for 17 days, and that customers received a variety of reminders in the final days to avoid having to extend their loans. | |
| Adam Freeman, of Mr Lender, said that it conducted strict affordability checks. It offered a loan to one in 100 applications, but forwarded the others onto its credit brokers. | |
| Industry trade bodies said that they had not expelled any payday lenders for failing to adhere to their codes of practice. | |
| Mortgage effect | |
| The hearing comes after an Office of Fair Trading (OFT) report said that there were "deep-rooted" problems in the way payday loans attract and treat customers. | |
| It threatened to refer the industry to the Competition Commission and has told individual lenders to improve how they deal with customers. | It threatened to refer the industry to the Competition Commission and has told individual lenders to improve how they deal with customers. |
| This had prompted 25 lenders to leave the industry, the government said. There are more than 200 payday firms operating in the UK. | This had prompted 25 lenders to leave the industry, the government said. There are more than 200 payday firms operating in the UK. |
| However, the Commons Public Accounts Committee has been scathing of the OFT's record in regulating the industry, accusing it of being "timid and ineffective" in a report published in May 2013. | However, the Commons Public Accounts Committee has been scathing of the OFT's record in regulating the industry, accusing it of being "timid and ineffective" in a report published in May 2013. |
| Meanwhile, mortgage commentator Ray Boulger from the advisers John Charcol told Newsnight that taking out a payday loan could adversely affect any future mortgage offer. | Meanwhile, mortgage commentator Ray Boulger from the advisers John Charcol told Newsnight that taking out a payday loan could adversely affect any future mortgage offer. |
| "Our experience is that mortgage lenders will often turn down requests for people who have had a payday loan - the regulator should require payday lenders to display this," he said. | "Our experience is that mortgage lenders will often turn down requests for people who have had a payday loan - the regulator should require payday lenders to display this," he said. |