Regulators urged to take action on payday loan firms

Welsh Labour’s Minister for Tackling Poverty, Huw Lewis, has called on UK regulators to take action against payday loan firms whose sharp business practices can trap people in a spiral of debt.

Huw Lewis has submitted evidence to a consultation being carried out by the Office of Fair Trading (OFT), who want to refer the payday loan market to the Competition Commission. The consultation is part of work being undertaken by the OFT into the practices of UK’s 50 payday lenders, a sector worth £2 billion. OFT research illustrates “a concerning picture of the UK payday lending market” where “lenders prepared to comply with the law and guidance…are driven out of the market”.

Huw Lewis was appointed as the Welsh Government’s first Minister for Tackling Poverty in March, the first appointment of its kind for a UK Government.

The Welsh Government is committed to taking action to protect vulnerable people and is calling on all UK governments to support this OFT initiative. It is particularly concerned at the evidence that many payday lenders do not comply with basic compliance requirements, such as assessing the affordability of a loan for an applicant. This squeezes more responsible lenders out of the market and allows unscrupulous ones to take advantage of people who are often in dire financial situations.

The Welsh Government also: supports the OFT view that a full investigation by the Competition Commission is required about the lack of competition in this market; is calling on the UK government to consider introducing regulations on the advertising of payday loans, in particular on television.