Investigation by Which? finds the payday loans market is rife with poor practice
The payday loans market is rife with poor practice, including potential breaches of the Consumer Credit Act, poor privacy provisions and inflated APRs, according to consumer organisation Which? Money.
Following an investigation into payday loan companies, Which? has reported two lenders ? Paydaykong.com and Swiftmoney.co.uk ? to the Office of Fair Trading, after finding that the former appeared to be operating without a consumer credit licence while the latter failed to show the APR for its loans.
Which? has also reported Casheuronet UK, which operates Quick-payday.co.uk and Quickquid.co.uk, to the Information Commissioners' Office (ICO) after its researcher received dozens of unsolicited third party emails and phone calls in the days following his application. This was despite the lender assuring Which? it does not sell customers' details to third parties.
Other examples of poor practice included potentially misleading claims about APR, and firms encouraging customers to borrow more than they need and to rollover existing loans for several months. Which? also found that several firms had lax website security, with one provider requiring customers to enter their bank details on an unsecured page.
Payday loans worth �1.9bn were taken out in 2010, up from �1.2bn in the previous year. They tend to be borrowed by people who have exhausted all other sources of money and are therefore higher risk and more expensive.
Which? cites the example of a �100 loan lasting 30 days from Wonga.com, which would cost �36.72 in interest charges.
Which? executive director, Richard Lloyd, said: "Payday loans might seem like a good solution for people whose money won't stretch to the end of the month, but they should be treated as an absolute last resort. They can be an incredibly expensive way to borrow and we've uncovered a long list of poor practice by lenders.
"With increasingly squeezed household budgets, more people are taking out payday loans ? so it's vital that regulators keep a close eye on providers and deal firmly with any lenders breaking the rules."
Source: http://www.guardian.co.uk/money/2011/sep/24/payday-loans-companies-reported-oft
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