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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. | |
| 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. | "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. | 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." | "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, the 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. | "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. |
| For a typical loan of £260 taken out for just over three weeks, lack of price competition could be adding £5 to £10 to the average cost of the loan. | |
| On average, customers take out about six loans per year, so a typical customer could save between £30 and £60 in a more competitive market, the regulator found. | |
| "Some customers may be getting a worse deal still, given that the gap between the cheapest and most expensive deals for a month-long £100 loan is more than £30," it added. | |
| The competition authority opened its investigation into payday lenders last summer after Office of Fair Trading (OFT) concerns about "deep-rooted problems with the way competition works" in the industry. | |
| The OFT said that customers found it difficult to identify or compare the full cost of payday loans. |