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Payday loan firms not competitive, says CMA Payday loan firms not competitive, says CMA
(35 minutes later)
Payday lenders lack price competition so customers may be paying too much for their loans, regulators have said.Payday lenders lack price competition so customers may be paying too much for their loans, regulators have said.
An investigation by the Competition and Markets Authority (CMA) has found that lack of competition could be adding £30 to £60 a year to customers' bills.An investigation by the Competition and Markets Authority (CMA) has found that lack of competition could be adding £30 to £60 a year to customers' bills.
The regulator will look at ways to change the situation, including establishing an independent price comparison website.The regulator will look at ways to change the situation, including establishing an independent price comparison website.
Lenders may also have to give clearer disclosure of borrowing costs.Lenders may also have to give clearer disclosure of borrowing costs.
"If you need to take out a payday loan because money is tight, you certainly shouldn't have to pay more than is necessary," said Simon Polito, chairman of the CMA payday lending investigation group.
The average income of payday lending customers is similar to the overall population, but access to other credit options is often limited, he said.
"In some cases those borrowers paying the extra costs are the ones who can afford it the least," said Mr Polito.
"This can particularly apply to late payment fees, which can be difficult to predict and which many customers don't anticipate."
The role of companies that generate financial leads for payday lenders may also have to be more transparent, CMA added.
"We found that 40% of new online borrowers take out their first loan with a lender via a lead generator, but the way in which these companies earn their money - by selling customer applications to the highest bidder - is often not made clear on their websites and some customers are unaware that these companies are not actually providing the loan," Mr Polito said.