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Payday loans shaken up by competition regulator | Business | The …

Payday lenders will be forced to give details of their products on price comparison websites to help potential borrowers shop around under new competition rules for the sector.

The Competition and Markets Authority (CMA) said payday lenders’ customers find it hard to get clear information on the cost of borrowing. Letting them compare deals online will increase competition and make it easier for new lenders to offer better prices, the CMA said.

The regulator will also require payday lenders to be clearer about their fees and charges, make it easier for borrowers to shop around without hurting their credit record, improve data sharing between lenders and oblige them to give borrowers a summary of charges.

The proposals follow a price cap announced in July by the Financial Conduct Authority (FCA) that limits repayments to no more than double the sum borrowed. The CMA said it wanted to make sure the cap did not stifle competition by setting a going rate for all lenders.

The FCA estimated that payday lenders issued 10m loans worth £2.5bn last year. The sector grew rapidly during the recession, but politicians and campaigners have attacked lenders for preying on vulnerable customers and charging high interest rates that risk their borrowing getting out of control.

Wonga, the biggest online payday lender, was ordered last week to write off £220m of loans to 375,000 people that it admitted should never have been granted. The advertising watchdog has also banned Wonga from using an advert that fails to mention its 5,853% annual interest rate.

Simon Polito, the chair of the CMA’s payday lending investigation group, said: “Greater price competition will make a real difference to the 1.8 million payday customers in the UK. At the moment there is little transparency on the cost of loans and partly as a result, borrowers don’t generally shop around and competition on price is weak.

“Lower prices from greater competition would be particularly welcome in this market. If you need to take out a payday loan because money is tight, you certainly don’t want to pay more than is necessary. Given that most customers take out several loans in a year, the total cost of paying too much for payday loans can build up over time.”

The CMA also recommended that lead generator websites selling potential borrowers’ details to lenders should be clearer about their activities. Many borrowers think the sites are lenders rather than middle-men and do not understand that they sell customers’ details to lenders for fees.

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Payday loans shaken up by competition regulator | Business | The …

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