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New regulations proposed for pay day loans


New regulations have been proposed by the Competition and Markets Authority (CMA) which would increase price competition between payday lenders and help borrowers get a better deal.

The CMA, a non-ministerial department responsible for strengthening business competition and preventing and reducing anti-competitive activities, would like to encourage the development of a high quality price comparison site for pay day loans. Consumers would then be able to make quick and accurate comparisons between loans; saving them money and stimulating greater price competition in a market where many borrowers do not shop around in.

The CMA has also proposed a number of other measures to help competition in the pay day loan market. These include; greater transparency on late fees and charges, measures to help borrowers shop around without damaging their credit file, further development of real-time data sharing systems and a requirement for lenders to provide borrowers with a summary of the charges they have paid on their most recent loan and over the previous 12 months.

The CMA would also like greater transparency from lead generators,(websites which sell potential borrowers’ details to lenders), as many borrows thought they were the ones providing the loan, not simply intermediaries.

Simon Polito, Chair of the 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.
This is a proportionate set of remedies, which could be introduced quickly to make the payday lending market work much more effectively. Whilst the FCA’s price cap and its other regulatory actions to clean up the market will protect customers from some of the worst excesses, greater competition will drive prices down further and is the only way to ensure that customers are offered the best possible deals.”

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