Payday loans, adverts and the OFT

By Matthew Plant

As Christmas approaches, some payday loan providers are facing action by the OFT (Office of Fair Trading). An article on the BBC website tells us more.

Some payday lenders didn't provide enough information about the terms of their loans, while some weren't checking whether or not potential customers could actually afford to borrow - or explaining how they'd be charged if they went into arrears.

Right now, the OFT has started carrying out checks on the advertising on 50 companies' websites.

By the end of November this year, Consumer Direct had received over 1,500 complaints about payday loan providers; last year, it received just 700. As the Financial Times points out, more complaints were made about payday loans than about credit cards, even though the number of people with a credit card far outweighs payday loan customers.

The OFT has some serious concerns about the payday loan market - a market that's worth around £2 billion every year. It's estimated that around four million people now use payday loan companies (a serious jump from just 300,000 in 2006).

The regulator's main worry is 'the misuse of continuous payment authority, which allows a lender to take funds from a borrower's bank account even if the account is overdrawn'.

The OFT has not named any of the companies it's taking action against, but they could lose their consumer credit licences - without which it's actually illegal to lend money.

Image © iStockPhotos

Tags: Christmas, payday loan, OFT, Consumer Direct, credit cards

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