More short-term credit options needed to boost competition in payday lending

More choice of short-term credit is key to improving competition, says Citizens Advice as the Competition and Markets Authority (CMA) publishes its provisional decision on the payday loan industry.

The CMA has to reported that consumers need a price comparisons sector to find the best deal and help drive down prices. It will also introduce transparency around late fees and lead generators.

Gillian Guy, Chief Executive of Citizens Advice, said:

“More choice will help protect borrowers from predatory payday lenders.  The demand for short-term credit is here to stay as households continue to struggle to make ends meet.  That’s why consumers need a payday loan industry that lends responsibly and treats them fairly.

“Being able to compare prices and understand the full cost, including late fees, is important.  But borrowers also need more choice.  There is an opportunity for banks to enter into the market and provide a responsible alternative to payday loans.

“The CMA is right to look at the role of lead generators. We’re concerned that credit brokers are hindering people’s ability to make informed decisions about short-term loans.  Our evidence has found that some brokers are posing as direct lenders and worse still, some payday lenders are directing people they turn down for a loan towards a credit broker.

“Anyone who is in financial difficulty already should be pointed towards debt advice rather than offered a loan.  If you are struggling with your finances you can get help from your local CAB, online at adviceguide.org.uk or call 03444 111 444.”