Office of Fair Trading Investigates Payday Loan Businesses

Although the payday loan business has only recently been introduced to the United Kingdom, it has grown rapidly there, now making up about a fifth, or 20%, of the total money made from loan businesses. While its presence cannot be denied, the popularity of such businesses is a different story.

Payday loan lenders in the UK have face increasing criticism as consumers decry the ethics of these services, calling on the government to increase regulations for lenders and to better monitor their activities. In light of these growing concerns, the Office of Fair Trading has launched an investigation into several major lenders. This investigation hopes to stop lenders that the OFT believes are engaging in unethical business practices.

While the OFT's investigation will touch on a variety of issues, there are a few specific concerns that it will primarily be focused on. The first of these is whether lenders are giving out loans without reasonably making sure that the borrower can pay them back. The OFT wants to ensure that only those people who can afford to pay back a payday loan are the ones borrowing them in the first place, otherwise many people could be taken advantage of and sent into a hole of debt which they could not have conceivably gotten out of in the first place.

Another concern that the OFT is investigating is whether lenders are intentionally focusing on specific groups that knowingly have bad credit. While no specific group is mentioned, the OFT clearly has some in mind and hopes to stop lenders from taking advantage of them.

The Office of Fair Trading also wants to make sure that payday loan lenders like MyCashTime.com are not rolling over loans until the amount due on them becomes too high to afford. This is a common practice in the payday loan industry, as often times borrowers are unable to repay their loan on time and must withdraw a new loan in order to pay the original one. Each time a new loan is withdrawn, a new fee is charged, and the borrower must take out a higher loan in order to cover the fees of the original loan as well.

This can quickly escalate into a hole of debt which may become too deep to escape. Although this is a normal practice for lenders in the United States, it is restricted in the United Kingdom and could result in many businesses losing their Office of Fair Trading License, which is required by all money lenders.

In general, the OFT want to make sure that borrowers are being treated fairly by lenders. Their investigation hopes to make sure that lending rules and regulations are being followed by all such businesses, and plans to shut down those which are not doing so. What this means for the payday loan industry is yet to be seen. However, those businesses which are in compliance with OFT regulations need not worry, as the OFT is not intending on performing a witch hunt, but instead on getting rid of businesses with unsavory practices.

This should be a welcomed investigation for the industry, as it will see a reduction in unethical business practitioners and allow for legitimate lenders to operate without the stigma that generally follows lenders and the lending business because of such practices.

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