The Office of Fair Trading (OFT) said it decided to refer payday lenders for a full investigation by the Competition Commission because it continues to suspect that features of the market "prevent, restrict or distort competition".
The "fundamental" problems the trading watchdog has found, such as loans becoming far more expensive than struggling borrowers had expected, cannot be tackled by existing laws and guidance, it said.
The Office of Fair Trading (OFT) decision is the culmination of a large-scale investigation into the £2 billion payday sector, including spot checks on household names such as Wonga.
The Office of Fair Trading has referred the payday lending industry to the Competition Commission because of concerns it has about "deep-rooted" problems with the way competition works.
Debt charities have accused lenders of being "out of control", by granting loans to people who cannot afford to repay them:
- More than 7,000 people who contacted debt charity StepChange last year had five or more payday loans - rocketing from just over 700 in 2009
- Charities have also reported seeing cases where people were drunk when they took out the loan or had mental health issues
- They have raised concerns that penalty fees and charges piled on top of interest can also mean that the cost of the debt balloons out of proportion with the original loan for a struggling borrower
- In one case seen by StepChange, a client faced a total debt of £1,830 for an initial loan of £120
The trading watchdog will reveal this morning it plans to refer problems found with payday lenders for a full investigation by the Competition Commission, which has powers to ban or limit products and shake up whole markets.
Today's decision by the Office of Fair Trading comes after a major probe into the £2 billion payday sector. The watchdog published a damning report in March, in which it outlined the evidence it had gathered of "widespread irresponsible lending".
The UK has dropped from 5th to 12th place in a international comparison of household disposable income, according to a new report by the Office for National Statistics.
The UK was ranked fifth in 2005 but has since dropped by seven places to 12th in 2011, in a comparison of household actual disposable income per head.
The report suggests that the figures reflect the experiences of households since the recession began in 2008.
The increasing price of goods and services, as well as the devaluation of sterling during this period are cited as key reasons for a reduction in disposable income.
Lloyds have announced underlying profits of £2bn for first three months of the year.
Lloyds says lending is up by £600 million too, an that its success is down to 'safer and simpler business'.
The bank says it is still expecting to float the branches they didn't sell to the Co-op in middle of next year .
It is also Interesting that Lloyds have revealed they still have 18 billion of liabilities in Greece, Ireland, Spain and Portugal - the bulk of that in Ireland.
And crucially for Lloyds no additional money is being put aside for PPI.
Click here to see the full figures www.lloydsbankinggroup.com
The wartime leader will become the first politician of the modern era to feature on a banknote.Read the full story ›
A brief history of the military and political life of Sir Winston Leonard Spencer Churchill.Read the full story ›
Executive Director, Banking & Chief Cashier Chris Salmon discusses why the Bank chose Winston Churchill.
He said: “The Bank is privileged to be able to celebrate the significant and enduring contribution Sir Winston Churchill made to the United Kingdom, and beyond.”
Our banknotes acknowledge the life and work of great Britons. Sir Winston Churchill was a truly great British leader, orator and writer. Above that, he remains a hero of the entire free world. His energy, courage, eloquence, wit and public service are an inspiration to us all. I am proud to announce that he will appear on our next banknote.