13 February 2016

UK competition watchdog proposes price comparison site for payday lenders

11 June 2014  |  2827 views  |  0 20 pound note

The UK's competition watchdog has floated the possibility of an independent price comparison website for payday lenders after concluding that Brits are over-paying for their loans.

Preliminary findings from a Competition and Markets Authority (CMA) investigation into the industry suggests that a lack of competition is adding up to £10 to a typical loan of £260 taken out for just over three weeks.

The CMA estimates that greater competition could save customers more than £45 million a year, relative to total revenue earned by payday lenders of around £1.1 billion.

The popularity of UK payday lending has risen dramatically in recent years. In 2012 1.8 million people took out 10.2 million loans worth £2.8 billion, an increase of up to 50% on the previous year.

There are at least 90 firms scrabbling to grab a slice of this rapidly growing pie yet the three biggest players - CashEuroNet, Dollar and Wonga - account for around 70% of total revenue.

To help promote competition and drive down prices, the CMA will now look at the establishment of an independent price comparison website. It also wants clearer upfront disclosure of borrowing costs if a loan is not paid back in full and on time, as well as greater transparency about the role played by lead generators.

Simon Polito, chairman, payday lending investigation group, CMA, says: "Given the problems with price competition, we believe that the creation of an independent price comparison website is a particularly important option - as those that exist at the moment suffer from a number of limitations and are only used by a small proportion of borrowers."

Payday lenders are already facing tougher regulations after coming under the remit of the new FCA, while the government is considering a cap on the costs of loans.

Comments: (0)

Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board, sign up now.

Related blogs

Create a blog about this story (membership required)

Related stories

03 October, 2013
23 November, 2012
22 November, 2012
24 February, 2012
12 January, 2012
Your browser is unable to support Flash files.

Top topics

Most viewed Most shared
UK sets out open banking API frameworkUK sets out open banking API framework
15487 views comments | 100 tweets | 89 linkedin
Deutsche Bank calls for co-operation with fintech firms on B2B servicesDeutsche Bank calls for co-operation with...
8450 views comments | 28 tweets | 30 linkedin
How to accelerate your fintech startupHow to accelerate your fintech startup
8072 views comments | 34 tweets | 9 linkedin
Is Paym a failure?Is Paym a failure?
6839 views 16 comments | 23 tweets | 16 linkedin
Visa issues API to offer consumer control over card transactionsVisa issues API to offer consumer control...
6310 views comments | 17 tweets | 28 linkedin

Featured job

up to £95K base, £190K OTE, benefits
London, UK

Find your next job