In a bid to increase competition among the payday sector, The Competition and Markets Authority have told Payday Lenders that they must make their product details appear on at least one price comparison site.
The decision follows a twenty month investigation into payday lending by the CMA who found that at present most borrowers did not shop around for their loan or compare the costs. The CMA are vying to increase clarity by utilising comparison websites and also ensuring Payday lenders give current borrowers a loan summary, explaining the total cost of their loan. It is hoped this will lead to a greater understanding of the overall costs associated with borrowing.
Simon Polito, Chair of the CMA’s Payday Lending investigation group commented:
“Our actions are aimed at making the market more competitive and further driving down costs for borrowers. We think costs can be driven lower and want to ensure that customers are able to take advantage of price competition to further reduce the cost of their loans.”
The CMA has also set out a number of areas of improvement to be made going forward:
- Greater transparency on late fees and charges.
- Measures to help borrowers shop around without damaging their credit record.
- Expanding real time data-sharing services to help new lenders assess credit risks more accurately.
- Increasing the clarity of websites selling on borrowers details to lenders.
The CMA has already begun talks with comparison sites to incorporate payday loan comparisons and they also believe dedicated commercial websites will emerge to cater to borrowers.
The changes follow the FCAs price cap on payday loans implemented in January, Mr Polito said the FCA’s price cap would reduce the overall level of prices, but said these further changes would ensure that the cap “does not simply become the benchmark price set by lenders for payday loans”.
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