Much has been made of the growth of payday lenders, the reported high costs they charge. But, has this public backlash been the impetus for a sudden decline in the numbers of payday lenders?
The Office of Fair Trading (OFT) gave 50 payday lenders a short timescale to prove their business practices were up to standard. Of these, 14 threw in the towel (metaphorically speaking) and another failed to prove it was up to scratch.
Of the 14 who have packed it in, 3 have surrendered their licenses entirely. The other 11 have simply changed their license and will continue to operate in other areas such as pawnbroking or debt collection. Both these areas require a credit licence from the OFT.
The OFT are currently working through the reports provided by all these lenders (the 50 quoted make up 90% of the UK market).
Business secretary Vince Cable was quoted as saying –
“..clearly shows that tough enforcement is having a real effect”
“Clearly there is more work to be done. I look to the remaining 35 lenders to take action to fix the problems in their own practices, or face up to further sanctions by regulators.
That’s a lot of ‘clearly’ from Mr Cable. He went on to say –
“Consumer Minister Jo Swinson recently met with the industry at a payday summit where I know she made progress developing priorities for the new Financial Conduct Authority in tackling payday lending problems.”
There is another side to this. That is that a market exists for this type of borrowing to this demographic. Whenever anything that is in demand is removed from the market then it doesn’t disappear, it merely goes somewhere else.
We wait to see where the demand goes…
If you have any comments about this article please add them above, or feel free to contact us via the website.
By David Farmer