More payday lenders are reported to have quit the market rather than face further scrutiny from the Office of Fair Trading (OFT).
The OFT says that of the 50 lenders it had investigated, 19 have now left the market, with one more reporting that it has ceased trading.
The regulator contacted 50 leading firms in March, following a year-long review into the sector.
Lenders were asked for an audit and given three months to prove that they were bringing their practices into line with the terms of the consumer credit act, upon which their licence to operate is founded.
By the end of July, the OFT revealed that almost a third of the lenders had decided to withdraw from the sector (read more).
Another five have since followed, taking the total to 19, although the majority of these will continue in other regulated financial services.
The OFT’s concerns with the payday lending sector include the lack of adequate affordability checks, a failure to guard against fraud, and a culture of intimidation for customers who struggled to repay on time.
The rate of withdrawal from the market is raising concerns at the kind of malpractice that is assumed to have taken place over recent years, with just over half the number of leading lenders willing to abide by the expected legal conditions.
The OFT also referred the sector to the Competition Commission after finding fundamental issues that work against the interests of the consumer.
The Commission has opened its investigation into the sector, and will seek to determine how consumers are able to shop around and establish value for money on loan products.
Keith McDonald
Which4U Editor
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