'Timid' regulator criticised over rogue payday loans
MPs claim the OFT is 'tiptoeing' around lenders who target vulnerable people struggling with debt
THE OFFICE of Fair Trading has been "ineffective and timid" in tackling rogue payday and door-to-door lenders, according to a report by MPs.
Questionable behaviour at the "shabby end" of the consumer credit market cost consumers at least £450m a year – but the influential Commons Public Accounts Committee said the OFT was failing to stop lenders targeting the vulnerable.
Committee chair Margaret Hodge claimed the regulator "passively waits for complaints from consumers before acting". She said: "It has never given a fine to any of the 72,000 firms in this market and very rarely revokes a company's licence. The regulatory regime must stop tiptoeing around the problem."
However, the MPs did say the OFT's March decision to give 50 payday lenders a 12-week deadline to improve their practices or lose their trading licences was "encouraging". Following the action two payday lenders surrendered their credit licences, three had their licences taken away and another three face formal investigation, the BBC notes.
Next year the OFT will be replaced by new regulator the Financial Conduct Authority. The report said the new authority "needs to have a fundamentally different and more robust approach" to payday lenders. Hodge said they hoped "this marks the start of a genuine step up from the inadequate approach that was evident at our hearing".
The PAC comments come after the National Debtline says it received 20,013 calls about payday loans last year, double the number in 2011. Earlier this week, Citizens Advice said the payday lending industry was giving loans to people with mental health issues and was "out of control".
An OFT spokesperson said it was "disappointing" the committee had not acknowledged it works under legal constraint "including a lack of regulatory powers and the limited circumstances where a fine can be imposed." ·