Payday firms let off by ‘timid’ OFT

wonga-300x203Payday loans firms have been allowed to get away with predatory practices – leaving customers with out of control debts – because the Office of Fair Trading has been “ineffective and timid in the extreme”.
That is the verdict of the Parliamentary Public Accounts Committee, chaired by Margaret Hodge, which accuses firms of targeting vulnerable people to take out loans which rapidly mount and soon become impossible to repay.
But it points the finger of blame squarely at the OFT, for failing to get to grips with the unsavoury practices of some companies, which cost their victims at least £450m a year.
Hodge accused the regulator of “passively waiting for consumers’ complaints before acting”. She said it has never issued a fine to any of the 72,000 firms in the market – said to be worth £2bn a year – and rarely revokes a company’s licence.
The criticism comes despite threats from the OFT to clampdown on payday loan firms’ marketing, as well as handing 50 payday lenders a 12-week deadline to prove their good behaviour or risk losing their licences to trade. The MPs called it an “encouraging” step, although expect it to be just the start of a more concerted effort.
Hodge added: “We will be expecting the OFT to show this marks the start of a genuine step up from the inadequate approach that was evident at our hearing.”
The committee’s report said the OFT “lacks basic information about the consumer-credit market, such as the amount of lending by each firm, the products sold by each and the types of consumers buying the products”.
But a spokesman for the OFT countered: “In the last financial year alone, the OFT has revoked the licences of some of the UK’s largest credit brokers and debt-management firms, and taken formal action in more than 85 other cases.”
He added: “We are disappointed the committee has not acknowledged the constraints of the legislation under which the OFT operates which… was not designed to provide a supervisory approach to addressing potential consumer harm.”

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