An 'extensive review' into payday loans has been launched by the OFT (Office of Fair Trading). As the OFT's own website explains, this was partly because of 'concerns that some payday lenders may be taking advantage of people in financial difficulty'.
By checking how well payday loan providers comply with the Consumer Credit Act - and OFT guidance on irresponsible lending - the review will turn up some evidence that'll be used to improve standards. Any payday loan provider found to be 'unfit' to hold a consumer credit licence will have its licence revoked, meaning it won't be allowed to lend money anymore.
The review will focus on a few key areas of concern, such as:
- Handing out loans without carrying out a check to make sure the borrower can actually afford to repay the money.
- The practice of 'rolling over' loans so they become unaffordable as the charges accumulate.
- Failing to provide fair treatment for people who've taken out loans and then fallen into financial difficulties.
- 'Inappropriately' targeting certain groups of people, offering them loans that are 'clearly unsuitable or unaffordable'.
To carry out the review, the OFT will inspect 50 big payday loan providers and survey various consumer and industry organisations - and it has already assessed more than 50 payday loan websites in the run-up to the review.
Before anyone takes out a payday loan, the OFT advises, it's essential they make a point of understanding exactly what it'll cost.
Article by ThinkMoney.com.
Useful: Payday loan debt guide