According to a recent report the Office of Fair Trading is to look more closely at payday loans, and this follows calls from a variety of debt campaigners and charities to launch an investigation into payday loans because of the high rate of interest that is charged on these loans. Payday loans are short term loan for relatively small sums of money, often used by those that need some money to tide them over until payday comes around, and with household finances getting increasingly tighter more and more people may be relying on loans such as these to get by each month.

When urging the OFT to investigate payday loans debt officials used an example where one payday loan company was charging the equivalent of over 1500% interest on a loan of £750. Officials have said that the fees that are charged on these loans are way too high. The OFT has said that it is launching an investigation relating to the whole of the lending industry, and that the investigation into payday loans will form part of this.

According to officials from the Office of Fair Trading the purpose of the investigation is to determine ‘what constitutes responsible lending under the Consumer Credit Act and how this affects companies’ holdings of consumer credit licences’.

Debt campaigners and officials have said that the OFT should have taken greater action of regulation of payday loans and monitoring or practices and charges within the payday loan industry, with one official stating: ‘We believe there is a lot more they could be doing to curb the worst excesses of the payday industry.’

However, an official from the payday loan industry said that it was important to consider that because the loans were so short term and for such small amounts of money it wasn’t fair to talk about the APR in this way. He said: ‘It just doesn’t make sense quoting those huge APRs. The loans would never get that large, mainly because the borrower would never be able to pay them back.’

Recent Additions:

• House sales slump by 40% according to report
• 20% fall in rents in some areas
• A difficult twelve months lie ahead
• Higher arrangement fees in place for mortgage borrowers
• Using a broker for your borrowing

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