THE payday loan industry has been warned by the Prime Minister that increased regulation was needed.
David Cameron said today it was not acceptable rogue companies were ignoring strict rules governing the sector.
He said greater regulation in the industry was needed, telling MPs the Government had given the Office of Fair Trading new powers to suspend licences when firms flout the rules.
Transgressions often include failing to check whether consumers can afford debt repayments and providing inadequate details about the cost of loans.
Mr Cameron said: “I think we do need to take action here, that is why we are giving the Office of Fair Trading a new power to suspend the consumer credit licence with immediate effect where there is an urgent need to protect consumers.”
Several payday lenders were facing formal investigations over the use of “aggressive debt collection” methods, the trading watchdog said today.
The Office of Fair Trading (OFT), which is carrying out a compliance review into the industry, is also writing to all 240 lenders in the market to outline its concerns about poor practices by some in the growing sector.
It said it expects to warn the majority of 50 firms it has inspected they risk enforcement action if they do not improve their standards.
The UK’s most high profile lender, Wonga, which sponsors resort team Blackpool FC, said it welcomed the OFT report and its recommendations.
A spokesman said: “Regarding continuous payment authority, which is also used by a broad range of businesses outside of consumer credit, we believe it is an important method of collection and we share the OFT’s concerns it must not be misused.”