OFT review 'amounts to a green light to 2500%+ loans'
The Office of Fair Trading has published its review of the high-cost short-term lending market in the UK and concluded that - while consumers do not benefit from sufficient competition between lenders - the market works 'reasonably well'.
However, in its statement announcing its findings, the OFT acknowledged the need for Government to consider action in order to safeguard consumer interests.
Announcing the findings of its review, OFT Director of the Credit Group Ray Watson said: "Our report has found that people who use high-cost credit have limited options and find it difficult to exercise what choice they have to obtain the best deal. This means that competition between suppliers is less effective than it might be.
"The recommendations we're making today would deliver worthwhile improvements to these markets but more radical approaches, outside the remit of the OFT, need to be examined by the Government if the fundamental and longstanding issues of lack of consumer power and limited supply are to be tackled.'
You can see the OFT's statement and links to the full published review at its website.
The 2356percent campaign welcomes the OFT's review. We recognise that the OFT is powerless to intervene in a marketplace where there is insufficient competition, despite acknowledging that greater competition between lenders is likely to be to the benefit of consumers. We also welcome the OFT's acknowledgement of the need for Government scrutiny of the payday lending sector.
But the OFT's conclusions clearly demonstrate that an absence of consumer choice exists because lenders choose not to behave competitively. In effect, its review amounts to a green light to high-cost short-term lenders to carry on lending at 2,500% or more.
In the absence of sufficient competition, the need for regulatory intervention to ensure that borrowers of short-term loans are afforded the same protection as investors in savings and investment products, is apparent.
We renew our call for the Government to take steps to bring payday lending under the ambit of a regulatory body that is able to intervene in the conduct of businesses offering short-term loan products in the UK. The Government must transfer regulatory responsibility from the OFT to the Financial Services Authority (FSA) and its successor consumer protection body.
