This year payday lenders are facing the new challenge of having to look their adversaries in the eye. Payday services will face concrete competition in 2015.
The Competition and Markets Authority (CMA) has said that payday lenders must display information on all of their products and services on at least one price comparison website in order to facilitate fair market competition. After looking into the matter the CMA has found that most borrowers rarely went to the trouble of shopping around for the best deal. New legislation also requires Payday lenders to provide their borrowers with a summary of the loan that is being requested and a complete explanation and calculation of how much the loan will cost, what fees are to be charged, and what happens should the loan not be repaid timeously. These decisions follow nearly two years of investigation into the controversial business sector. Much time and effort has been taken to reform the payday market so that it can become a legitimate financial sector that operates within fair and legal parameters.
One of the biggest reason payday services will face concrete competition is to make the market as much a part of the economy as any other industry.
Simon Polito, the Chair of the CMA’s Payday Lending investigation group, says, “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 is dedicated to bringing several new actions into play regarding short term payday loans:
- Late fees and charges are to be more transparent
- Lenders are to make sure the process of shopping around for the right loan is facilitated smoothly
- Lenders are to make sure customer’s credit records are in no way damaged
- Lenders must expand real-time data sharing and credit rate assessment in order to be as accurate as possible
- Websites that are selling their clients details to lenders will need to be clearer about their roles.
At the moment it is not possible to find the prices, interest, fees, and charges of payday lenders on price comparison websites, but the CMA feels confident that this will be the norm within a short period of time. Otherwise the payday lenders themselves will have to facilitate a comparison website of their own. This follows the enforcement of the price cap in January and the advent of the payday companies taking a big step into the conventional world of finance. It will be very interesting to follow the market response over the next year as payday services will face concrete competition.