Two payday loan companies give up credit licenses, three more could be closed as OFT steps up actions against lenders

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Two payday loan companies give up credit licenses, three more could be closed as OFT steps up actions against lenders

Two payday lenders gave up their business licenses after a crackdown by the Office of Fair Trading (OFT).

The OFT said it is also currently investigating three other payday loan companies for bad business practices and they may also be shut down. The OFT was unable to nominate them for legal reasons.

The Payday Loan Company Limited – which operates under several names, including Cashnet and Paydayloans.co.uk – and Anfield Check Cashing Center have both relinquished their consumer credit licenses and will no longer be able to trade.

Update: OFT said two repair companies have now relinquished their licenses and three are still under investigation as part of its action on the industry.

It comes after the consumer organization sent letters to 50 major payday lenders last month asking them to take immediate action to revamp their businesses.

OFT accused companies of failing to conduct adequate assessments to see if applicants can afford loans, failing to explain how payments will be collected, failing to use debt collection techniques aggressive and not to treat borrowers with sensitivity and patience.

A spokesperson confirmed today that all 50 letters have now been sent. The lenders had 12 weeks from receiving the letters to clean up their deed.

The action is part of an industry review and the OFT has said it will provide a further update on it in June. He is also currently consulting on whether he should refer the entire market to the Competition Commission – an announcement on that decision will also be made next month.

The OFT has already taken steps to revoke the licenses of three payday lenders – MCO Capital Limited and two check cashing companies that offer payday loans – B2B International UK Ltd (“B2B”) and Loansdirect2u.com. Ltd.

An OFT spokesperson said: “The OFT has also announced that it has opened formal investigations into the practices of three payday lenders. In addition, three payday lenders have also had their licenses revoked and two more have relinquished their licenses since the OFT’s study of the industry was published in March. ‘

Debt: The Citizens Advice Bureau has accused payday lenders of irresponsible lending by failing to adequately check borrower affordability.

Debt: The Citizens Advice Bureau has accused payday lenders of irresponsible lending by failing to do adequate borrower affordability checks.

The OFT comes at a time of intense criticism of the payday loan industry. The Citizens Advice Bureau today accused lenders of pushing people into debt by failing to verify that borrowers can afford to repay the loan.

In a survey of 1,270 payday loan borrowers, with loans from 87 payday lenders, 65% of people were not asked about their financial situation when taking out, according to a CAB study.

Concern: New data from StepChange, also released today, shows there has been a 109% increase in the number of people contacting the debt charity with payday loans.

Concern: New data from StepChange, also released today, shows there has been a 109% increase in the number of people contacting the debt charity with payday loans.

The CAB said that in the four months it collected the data, more than 11,000 people turned to Citizens Advice online for help with payday loans.

Gillian Guy, Managing Director of Citizens Advice, said: “Payday lenders don’t keep their word to treat people fairly by verifying that they can actually afford the loans on offer.

“The ripple effect of their irresponsible loans is devastating for families as they go into debt.
“Many are finding they don’t have the money to put food on the table, pay the bills or get to work as lenders empty their bank accounts in an attempt to collect debt.”

Meanwhile, new data from StepChange has shown that there has been a 109% increase in the number of people contacting the charity for debts with payday loans.

StepChange said average payday loan debt now exceeds their monthly net income, highlighting the deeply negative impact payday loans can have on people’s finances.

The charity said it was also “deeply concerned” by evidence it saw of widespread misconduct in the industry.

The news follows today’s announcement that more than 30 credit unions are fighting payday lenders by signing a landmark expansion plan.

It is hoped that the Association of British Credit Unions-led project will attract a million new members over the next five years, with a £ 35.6million investment previously pledged by the government to transform the sector.

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