Consumer financial website Moneysavingexpert.com has highlighted a number of payday lenders who were not complying with new rules introduced in May 2017 by the competition watchdog, the Competition and Markets Authority (CMA).
In a drive to improve competition across the payday sector, all lenders must now list on at least one price comparison website, and this website must be one that is regulated by the Financial Conduct Authority (FCA). Their websites must also contain a prominent link to the chosen comparison site, however Moneysavingexpert looked at 50 lenders’ sites in June of this year, and could not find any such link on ten of the sites, while on another ten sites, the link was not judged to be ‘prominent’ enough.
Some lenders have however now remedied this after being ‘named and shamed’ by Moneysavingexpert.
Wonga, the best-known name in the marketplace, has chosen a site called Choose Wisely to list its offering. It appears to be meeting the requirements – there is a prominent link to this site in the top right of its homepage.
The new requirement will hopefully allow consumers to easily compare the interest and other fees being charged by different lenders, and the CMA also hopes that the move will also facilitate the entry into the marketplace of smaller payday lenders, who can then compete effectively with the larger, more established firms.
The CMA has estimated that the lack of competition within the industry is costing payday loan borrowers an average of £60 per year.
The information lenders must now provide on price comparison sites includes:
• The amount payable in interest, fees and charges, and how these payments will be structured
• The minimum and maximum loan durations that are available
• The incremental lengths of a loan that are available
• The minimum and maximum loan values
• The increments by which loan values can be increased
• The fees and charges for late or missed payments
• The effects of repaying a loan early
• Any other relevant information that would allow a consumer to work out the total cost of a loan
In response to the findings of Moneysavingexpert, a spokesperson for the CMA commented:
“We can take further enforcement action which in the past has included issuing detailed directions to companies and ultimately we can go to court – albeit as a last resort given the time and expense involved when obtaining compliance by other methods is quicker.”
This illustrates that payday lenders are becoming subject to new requirements all the time, and that it is not just the FCA regulations that firms need to comply with.
Complaints about payday lenders are increasing rapidly, so firms that fail to treat their customers fairly could find themselves being forced to pay large sums in compensation. Payday loan complaints to the Financial Ombudsman Service rose by 227% from 3,216 in 2015/16 to 10,529 in 2016/17. In 2014/15, there were only 1,157 complaints made to the FOS about these loans, so complaint numbers have risen by a factor of nine in just two years.
Lenders should also keep a close eye on any announcements from the FCA in the coming weeks. It is well known that the regulator is reviewing the price cap, which limits the amounts lenders can charge in fees and interest, and limits the number of times a loan can be rolled over to two.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.