Payday loans industry is, according to charity, 'out of control'
The Office of Fair Trading is looking at the industry and will be closing companies down if their practices are not up to standards. A decision is expected next month.
Citizens Advice wants the OFT to immediately ban some payday lenders who they say are causing harm to borrowers. They've found that people where being chased for loans they had not taken out and customers were being "hounded" at home to shame them into paying up.
Gillian Guy, Citizens Advice chief executive, described the payday loan industry as "out of control", adding: "It is vital that, following the investigation, the OFT takes swift action to protect consumers from the harm caused by these unscrupulous lenders."
The charity have looked at the feedback from 2,000 payday loans, and they found that in almost 9 out of 10 cases, borrowers weren't even asked to show evidence of being able to afford loans. Three quarters said that they had struggled to repay the loan and 84% of people with repayment problems were not offered the chance to have their interest and charges frozen.
An OFT spokesman said: "Of the 50 payday lenders that were inspected during the compliance review, 48 have confirmed that they will provide the OFT with proof that they are fully compliant, while two have surrendered their licences. The OFT has also announced that it has formal investigations open into the practices of three payday lenders and, in addition, three payday lenders have also had their licences revoked since the review of the sector in March."