OFT reviewing payday lender compliance with Consumer Credit Act and OFT guidance on irresponsible lending

The OFT has launched a review of payday lenders to investigate compliance with the Consumer Credit Act 1974 and the OFT’s guidance on irresponsible lending. A payday loan is a “short-term, high interest, unsecured loan, typically repaid by the time/when the borrower receives his next regular income payment (normally on or around/within 30 days of having been granted the loan).”

The OFT will be conducting on-site inspections of 50 major payday lenders and surveys of industry and consumer organizations, such as the British Cheque and Credit Association (BCCA), Consumer Credit Association (CCA), Consumer Credit Trade Association (CCTA), Consumer Finance Association (CFA), Finance and Leasing Association (FLA), and National Pawnbrokers Association (NPA).

The probe is prompted by concerns that payday lenders may be taking advantage of people in financial difficulty, with practices such as targeting groups with unaffordable credit and granting loans without first checking to see if the borrower can afford to repay. Enforcement action may take the form of revoking firms’ licenses to operate.

Source: OFT Press Release

Related Content: The OFT Discussion Paper – Private Actions In Competition Law: Effective Redress For Consumers And Businesses (Emanuela Lecchi, Watson, Farley & Williams)