Payday loans 'should be on comparison websites'
The Competition and Markets Authority has called for payday lenders to make their products more transparent across the market.
The Competition and Markets Authority (CMA) is calling for payday loans to appear on comparison websites so borrowers can get a better deal.
Customers would be able to directly compare loan rates including the exact amount they will be repaying, taking interest and other charges into account.
This is part of a set of reforms set out by the body to get the notorious payday lending market under control.
It also recommends that websites selling potential borrowers’ details to lenders, known as 'lead generators', should explain their role more clearly.
The CMA found that there wasn’t even price competition between lenders, meaning that customers could be paying an extra £30-60 a year when they don’t have to. More competition could help 1.8 million borrowers in the UK.
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A raft of reforms
The CMA also proposes that there should be:
- greater transparency on late fees and charges;
- measures to help borrowers compare loans without it affecting their credit history;
- more real-time data sharing services so that lenders can assess credit risks more accurately;
- more information for borrowers on charges they have paid on their latest loan and over the last 12 months.
Back in July, the Financial Conduct Authority put a price cap on repayments to payday lenders. They can no longer charge borrowers more than double what they loaned.
A final report will be published by the CMA at the turn of the year.
Ad ban
A Wonga advert was banned recently for failing to mention the small matter of the annual interest rate, or representative APR, charged to borrowers.
The Advertising Standards Authority said that the advert breached its code. The ad says “you can even pay back early and save money” which suggests that it may be cheaper than other loans. As this indicated price comparison, Wonga should have shown its representative annual interest rate.
Check out The best alternatives to payday loans for lower-risk ways to minimise your debt.
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