People are 'increasingly having to turn to lenders'
Margaret Hodge, chairwoman of the Public Accounts Committee said consumers are "increasingly having to turn to lenders" as money gets tighter and banks are lending less.
She added that some lenders are using "predatory techniques" to target vulnerable people. She said:
Such disgraceful practices by the shabby end of the credit market are costing borrowers an estimated £450 million or more each year.
Meanwhile, the Office of Fair Trading, the regulator of this sector, has been ineffective and timid in the extreme. It passively waits for complaints from consumers before acting. It has never given a fine to any of the 72,000 firms in this market and very rarely revokes a company's licence.
It doesn't understand the market - how much each firm lends and who its customers are - and can't be certain if directors of companies that have run into trouble are now running other companies.
MPs: OFT is 'ineffective and timid in the extreme'
A damning report from a committee of MPs has accused regulators of failing to get to grips with "predatory" lenders who leave vulnerable customers struggling with spiralling debts.
MPs have accused the OFT of being 'ineffective and timid' Credit: Lynne Cameron/PA Wire
The Public Accounts Committee said the "shabby end" of the credit market was costing borrowers £450 million a year, but that the Office of Fair Trading (OFT) had not taken the tough action needed to protect consumers.
The OFT had been "ineffective and timid in the extreme", committee chairwoman Margaret Hodge said.
The regulator insisted it had taken "strong, targeted action" to protect consumers but was constrained in what it could do by the existing legislation.
A debt advice charity has warned that "out of control" payday lenders are failing to act responsibly and are hounding people for money.
In recent months, Citizens Advice has seen lending to people who were aged under 18, people with mental health issues or people who were drunk when they took out the loan.
Citizens Advice are warning people about irresponsible payday lenders Credit: Lynne Cameron/PA Wire
It comes as Britain's biggest payday lenders are under threat of being put out of action if they fail to prove to the Office of Fair Trading (OFT) that their practices are up to scratch.
In June, the OFT is expected to announce whether it will refer the payday market for an investigation by the Competition Commission.
The OFT said it is investigating a number of "free" web and app-based games with concerns over additional costs from add-on features.
In March, ITV News spoke to Danny Kitchen and his mother Sharon. Danny racked up a £1,700 bill in just a few minutes by unwittingly buying add-ons for a zombie game on his parents' iPad.
OFT: Parents and children subject to 'unfair pressure'
The OFT said they are concerned that children and parents are subject to "unfair pressure" to purchase, when playing on web or app based games, which can lead to "substantial costs".
The OFT is not seeking to ban in-game purchases, but the games industry must ensure it is complying with the relevant regulations so that children are protected. We are speaking to the industry and will take enforcement action if necessary.
– Cavendish Elithorn, OFT senior director for goods and consumer
"Free" web and app-based games for children are under investigation following concerns that users can run up substantial costs.
The Office of Fair Trading (OFT) are investigating whether children are being pressured to pay for content within the games such as upgraded membership and virtual currency.
In most cases, players can download the games for free but must pay for extra add ons to the game, like higher levels and features Credit: Dominic Lipinski/PA wire
The OFT has contacted companies who run the games asking for information on how they market to children.
It is also speaking to parents and consumer groups calling for information about potentially misleading or commercially aggressive practices.
It concluded that evidence does not "show unequivocally" that interest rate restrictions would "reduce the cost of borrowing to consumers, particularly those on low incomes".
The research covered home credit, pawnbroking, retail payday lending (carried out instore) and online payday lending.
The research is the largest study to date of customers who use high-cost credit. Credit: Press Association
Sharon Collard, Director of the University’s Personal Finance Research Centre, said:
"At a time when UK households face unprecedented financial pressures there is a clear need to address the serious detriments that the research found.
"These include the cost of credit but also how lenders assess affordability, multiple and repeat borrowing and loan renewals.”
Unite: New payday loan rules 'do not go far enough'
The Government's new rules do not go far enough to properly regulate payday loans. The toxic combination of shrinking wages and rising costs is drawing more people into the clutches of these legal loan sharks.
The Government must cap the extortionate interest rates that payday lenders charge to help stop desperate borrowers falling into a spiral of debt. There also needs to be new rules to rein in these lenders' aggressive collection methods.
Controlling how much legal loan sharks are allowed to advertise is not good enough. They shouldn't be allowed to advertise on TV at all, nor should they be allowed to sponsor large events or football teams which can end up being associated with companies that exploit local communities.
From April, more people will be likely to turn to payday lenders as the Government scraps the Social Fund which was there to help with living costs for people struggling on benefits.
