The Competition and Market Authority has said payday loans customers are "paying the price" for the lack of competition in the sector.
Simon Polito, chairman of the Payday Lending Investigation Group, said:
Short-term loans like these meet a very clear need for around 1.8 million customers a year.
This level of demand isn’t going to go away so it’s important to ensure that this market works better for customers.
Our focus is now on taking practical steps that will make a real difference to borrowers so we now want to hear from all those involved on how best we can achieve this.
The Competition and Markets Authority has ruled the lack of competition in the payday loans sector:
- Could be responsible for adding £5-£10 to the average cost of a payday loan
- This is relative to a typical loan of £260 taken out for just over three weeks
- A typical customer (who takes out six loans a year) could save £30-£60 per year
- The gap between the cheapest and most expensive deals for a month-long £100 loan is more than £30
The Competition and Markets Authority has decided payday loans are more expensive due to a lack of competition in the sector.
ITV News Business Editor Joel Hills reports:
Competition and Markets Authority decides payday loans are more expensive than they should be due to a lack of competition between lenders.
CMA looking at creating independent price comparison website for payday loans and clearer disclosure of charges if loan not repaid on time.
The Competition and Markets Authority will investigate potential ways to increase price competition in the payday loans sector.
This will include setting up a price comparison website and creating clearer upfront disclosure of borrowing costs if a loan is not paid back in full and on time.