The clampdown on bad practice in the payday lending market has claimed the scalp of fourteen lenders, which have since decided to withdraw from the industry.
The Office of Fair Trading (OFT) wrote to fifty leading payday lenders in March following a year-long review into the sector, giving them 12 weeks to prove that they were bringing their practices into line with the report’s recommendations.
With the deadline now passed, the OFT has revealed that almost a third of these lenders had decided to withdraw from the sector.
Three have surrendered their credit licenses, while 11 others will continue to trade in other financial services.
Aside from those under investigation, the OFT confirmed that three other payday lenders had seen their licenses revoked following failed appeals into the regulator’s action, while two more had surrendered their licenses voluntarily.
The reluctance of so many payday lenders to face further scrutiny from the regulator is likely to cause some alarm at the scale of malpractice that has prevailed in the marketplace over recent years.
Failings of the Payday Lending Sector
The OFT's action had been prompted by concerns that lenders were failing to undertake adequate affordability checks, failing to prevent fraudulent activity, and harassing customers who were struggling to make repayments on time.
The investigation into the sector found that 17 of the 50 investigated lenders were promoting the ability for customers to 'roll-over' loans at rates of interest that reach several thousands of percent per year.
Meanwhile, three quarters of these lenders (38) failed to comply with at least one complaint-handling procedure set out by the Financial Ombudsman Service.
Last month, the OFT said it was referring the payday lending market to the Competition Commission for a full market investigation.
Keith McDonald
Which4U Editor
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