Payday Lenders Forced to Feature Loan Deals on Price Comparison Sites
February 24, 2015
Payday lenders across the UK will soon be obliged to feature details of their loan offerings on at least one price comparison site in the interests of consumer protection.
The independent Competition and Markets Authority (CMA) has ruled that having payday loans feature on price comparison websites will help give users of these financial facilities a much clearer understanding of what the associated deals entail.
CMA investigators have been looking at ways to improve practices within the UK’s payday loan markets for almost two years and have the power to introduce new rules with the backing of the Financial Conduct Authority (FCA).
Explaining its conclusions on the subject, the CMA said it has recommended to the FCA that price comparison websites should “provide customers with clear, objective and comparable information on all potential loan costs”.
The authority is also keen to ensure that potential borrowers should be able to compare different loan deals against one another with a particular focus on “the most relevant features such as loan amount and duration”.
The CMA is currently assuming that existing price comparison websites will be willing and able to deliver their services in the context of payday loan deals but, if this is not the case, then lenders themselves will need to set up websites for that purpose and have them authorised by the FCA.
The FCA is also being urged to do more to force payday lenders to disclose their policies on late fees and additional charges, and to bring more transparency to the ways in which the industry’s “lead generators” operate.
“Even where borrowers do shop around at present, it is difficult for them to compare prices between short-term loans given the differences between products and the limited usefulness of the APR in making comparisons,” said Simon Polito Chair of the CMA’s Payday Lending Investigation Group.
“To help them, we are requiring lenders to be listed on price comparison websites authorised by the FCA and have recommended to the FCA that these websites should carry all the information customers need to compare easily the total cost of different lenders’ loans.”
Earlier this year, the FCA introduced new rules that effectively set limits on the amounts of money payday lenders can charge their customers as interest and fees in relation to unpaid loans. The CMA has said its aim is to support these efforts by enhancing competition throughout the industry.
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