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High-cost lenders escape the wrath of the OFT

With the Office of Fair Trading (OFT) has, after a year-long investigation, decided not to impose pricing restrictions on high-cost lenders such as pawnbrokers, payday lenders and doorstop lenders. While there is some disappointment that the authorities have yet to step in and cap the current array of charges, with some interest rates in excess of 1000%, there was a feeling that by interfering with this particular area of the market it could reduce credit to those most in need.

There are also concerns that by effectively killing the high-cost lender markets overnight it could cause some lenders to go underground where there is even less protection for customers. However, the OFT has decided to push for further transparency from high-cost lenders and indeed some of this information will be made available to price comparison websites thereby making the public more aware of the differential between traditional lending companies and so-called "doorstop lenders".

This is a very tricky area for the authorities to tackle because effectively by limiting the interest rates that can be charged there is a real chance that liquidity in this vital area of the market would collapse. However, on the negative side many people have been drawn into nightmare debt situations simply by lending "a few hundred pounds".

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