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Payday lending compliance review

The Office of Fair Trading has undertaken a formal review of compliance by payday lenders with its relevant legislation and guidance, in particular the Irresponsible Lending Guidance.


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Update on progress

Fifty leading payday lenders, accounting for 90 per cent of the market, were each given 12 weeks by the OFT to prove they have addressed areas of non-compliance identified during the payday lending review.  

  • Nineteen of the 50 lenders have left the payday market.
  • The OFT currently has investigations open into six payday lenders and is reviewing detailed evidence on another 15 lenders.

In addition to the 50 leading lenders, and since the OFT published the final payday review report in March:

  • Three firms engaged in payday lending have had their licences revoked after their appeals against OFT determinations were either dropped or struck out by the First Tier Tribunal.
  • Another four lenders have also surrendered their licences.

OFT confirms investigation into former payday lender Toothfairy (10 January 2014)

The OFT can today confirm that it was investigating payday lender Web Loans Processing Limited (previously Toothfairy Finance Limited) and two associated debt collection firms, Marshall Hoares Bailiffs Ltd (previously Toothfairy Cheque Cashing Ltd) and Northern Debt Recovery Ltd.

Web Loans Processing Limited went into administration on 28 November 2013, and the consumer credit licences for Northern Debt Recovery Ltd and Marshall Hoares Bailiffs Ltd were surrendered by the companies, following a request by the OFT, and will formally terminate on 14 January 2014.

In October 2010, the OFT imposed Requirements on CIM Technologies Ltd, an associated company that at that time was trading as payday lender Toothfairy Finance Limited.

Web Loans Processing Limited - a sister company - subsequently took over the lending business. Following concerns about their business practices, including concerns raised by Citizens Advice, the OFT opened a formal investigation. The investigation included an inspection visit in October 2013. 

David Fisher, Senior Director of Consumer Credit, said:

'The OFT had serious concerns about the business activities of these firms, which we were actively investigating. If they had not surrendered their licences it was our intention to take steps to revoke them.

'The surrender of the licences means that the businesses may no longer operate as debt collectors. The lender is in administration and we will be taking steps to ensure any outstanding debts are collected legally and fairly.'

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What happens next?

We will analyse the evidence of compliance sent to us by lenders. If we still have concerns that they are not compliant, we have a range of options open to us. These include taking steps to remove their licence, imposing legal requirements on them to change certain aspects of their behaviour or, if we have evidence of imminent harm to consumers, suspending their licence immediately. 

On 27 June 2013, the OFT announced its final decision to refer the market for payday lending in the UK to the Competition Commission (CC) for a market investigation. Having considered responses to the consultation on its provisional decision, the OFT remained of the view that there were reasonable grounds for suspecting that features of the payday lending market were preventing, restricting or distorting competition. For more information, see the MIR case page.

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Final report

The OFT has published the final report of its compliance review of the payday lending sector. The review has found evidence of widespread non-compliance with the law and guidance across the sector and at every stage in the life-cycle of loans.

The report sets out our action plan to tackle deep-rooted problems in the market. This includes:

  • Formal investigations against a number of payday firms. See details of current and recent enforcement cases.
  • Requiring 50 lenders, accounting for 90 per cent of the market, to take immediate steps to address areas of non-compliance and prove to us within 12 weeks of our letter that they have done so - lenders that fail to cooperate risk losing their licence. See generic letter and annexe (pdf 521kb) demonstrating the type of correspondence received by the 50 lenders.
  • Setting out, for the avoidance of doubt, clear statements about how our guidance applies to payday lenders – we have written to every single payday lender (pdf 112kb) making clear that we expect them to act now to ensure they are meeting these standards.

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The OFT's extensive review of the payday lending sector was prompted in part by concerns that some payday lenders are taking advantage of people in financial difficulty.

The review investigated levels of compliance with the Consumer Credit Act and the extent to which businesses in the payday sector are meeting the standards set out in the ILG.

The review involved inspections of 50 major payday lending companies including compliance work with trade associations and surveys of industry and consumer bodies. Leading up to the review the OFT conducted a sweep of over 50 payday lending websites and wrote to the main trade bodies outlining areas where the OFT considers advertising standards need to be improved.

On 20 November 2012, the OFT published an interim report on the payday lending compliance review. 

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Irresponsible Lending Guidance (ILG)

The ILG was issued in March 2010 and updated in February 2011 and sets out the standards expected of licensees providing consumer credit, including payday lenders.

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Consumer complaint form

The OFT gathers information from consumers regarding their experiences with payday lenders. If you would like to provide us with details of your experiences, please complete and return the complaint form below. 

Please note you are only able to save changes to the complaint form if you have the full version of Adobe. If you do not have the full version, please print the document with your changes or print the document and complete it by hand.

The information you provide will be used to assist the OFT's ongoing monitoring of business practices in the payday lending sector.

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Related documents

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Team leader: Marie Whitley (0207 211 8287
Project director: Gordon Ramsay (0207 211 8420
Senior responsible officer: David Fisher (0207 211 5890

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Media enquiries

Any media enquiries should be directed to a member of our Press Office.  

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