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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

Following the publication of the final report of our compliance review of the payday lending sector, we sent a warning letter to all known payday lenders reminding them of the need to fully comply with the law and guidance.

In addition, we have sent to each of the 50 leading lenders we inspected - which together account for 90 per cent of the market - a letter which includes an annexe setting out details of the specific concerns regarding their behaviour and practices which we found during the course of the review. We are requiring these lenders to take immediate steps to address our concerns and ensure full compliance with the standards set out in the law and guidance, and to prove to us that they are fully compliant within 12 weeks.

The letters were issued in a rolling programme. The first one was issued on 6 March 2013, and the last on 3 May 2013.  Lenders have two weeks from the date of the letter to acknowledge receipt and confirm that they will submit proof of compliance within the 12 week deadline. The first lender's 12-week deadline for demonstrating compliance is 28 May 2013, and the final lender's deadline is 29 July 2013.

So far: 

  • All 50 lenders have acknowledged receipt of their dossier and confirmed that they will respond within the 12-week deadline
  • 48 have confirmed they will comply
  • two lenders have notified us that they are surrendering their consumer credit licences.

Since we published our final report in March, two appeals by firms engaged in pay.day lending against OFT determinations to revoke their licence have been struck out by the First Tier Tribunal, and another appeal was withdrawn by the lender with the effect that their licences are now revoked. Details of all our current enforcement cases can be found on the credit enforcement pages.

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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. We will provide a further update in June.

Consultation on our provisional decision to refer the payday lending market to the Competition Commission for a full investigation closed on 1 May. As at 1 May, we have received 20 responses. We are analysing these responses and expect to announce a final decision in June.

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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.
  • 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.

We believe that the problems in this market go deeper than a poor compliance culture, and that a full investigation by the Competition Commission is needed to identify lasting solutions. We are therefore also consulting on a provisional Market Investigation Reference.

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Background

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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Contacts

Team leader: Marie Whitley (0207 211 8287 marie.whitley@oft.gsi.gov.uk)
Project director: Gordon Ramsay (0207 211 8420 gordon.ramsay@oft.gsi.gov.uk)
Senior responsible officer: David Fisher (0207 211 5890 david.fisher@oft.gsi.gov.uk)

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Media enquiries

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




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