Payday loans opened up to comparisons
PAYDAY lenders will have to sign up to price comparison websites to increase transparency and prove they are competing fairly, the Competition and Markets Authority (CMA) proposed yesterday.
The watchdog fears that the incoming cap on interest rates will lead to that rate being the standard across the industry, cutting competition between lenders.
Lenders will also have to publish more details of fees and charges, as well as their interest rates.
“Greater price competition will make a real difference to the 1.8m payday customers in the UK,” said the CMA’s Simon Polito. “There is little transparency on the cost of loans and partly as a result, borrowers don’t generally shop around and competition on price is weak.”
Under the plans, the lead generators which link borrowers to lenders will also have to publish more information.
Currently, the CMA believes customers expect the lead generators to find them a good deal, when in fact they often sell the borrower on to lenders for the highest fees. And the watchdog wants to encourage more companies into the payday lending sector, again to boost competition and cut prices.
One plan to achieve that is to make payday lenders share more information on the credit-worthiness of their borrowers allowing them to make better loans more quickly and more fairly.
“These are sensible, proportionate proposals which recognise that the many people using short-term loans need the right information,” said Russell Hamblin-Boone from the Consumer Finance Association, which represents much of the industry. “The CMA is right to draw attention to lead generators who masquerade as lenders.”