Calls for an independent payday loan comparison site have been applauded in the light of reports that borrowers could be paying too much for their finance.
The Competition and Markets Authority (CMA) carried out an investigation into the costs of different payday loan lenders and found that a lack of competition could cost a customer anything up to £60 per year. It has put forward a recommendation that an independent price comparison service is launched so consumers have the opportunity to do a direct comparison across all lenders before making a decision who they apply to.
The CMA feels that there is no need for someone who is in need of a short term funding solution to pay any more than is necessary and online comparison site Payday Choice agree.
Payday Choice is an independent payday loan comparison website already operating in the UK and only works in partnership with those lenders who offer high standards of affordability checks, transparency in their interest rates and costs and are happy to provide easy to understand information to those looking to take out a payday loan.
The lack of competition and any real way to easily look at the actual costs involved meant that the study by the CMA found a typical loan of £260 with a borrowing period of 3 weeks could cost between £5-£10 to repay depending on which payday company was used. With the average customer taking out 6 loans in a year, this can add up to £60 being paid back which may not have been necessary if they had known of other providers who were willing to lend and to have knowledge of the total costs involved.
There’s already the opportunity for those who need funding to compare a range of lenders at www.payday-choice.com and the CMA are keen to see this initiative expanded to help those who need financial assistance in often challenging situations.
In 2012 there were approximately 1.8 million payday loan customers in the UK. Around 10.2 million loans were approved, worth £2.8bn. These figures represent a 35% to 50% increase on the previous financial year across the 90 plus payday lenders offering loans in the UK.
One of the main benefits of an industry-wide comparison site relates to the fact that the majority of loans are applied for online with the consumer focus being on speed rather than likelihood of approval rather than the cost. This has resulted in many companies not feeling the need to be competitive on price because the customers are not factoring it into their choice due to lack of easily accessible and comparable information.
Regulators are keen to ensure that payday loan companies clean up their act and only those who are willing to be responsible and responsive lenders to remain in the market in the years ahead. This is also a sentiment which Payday Choice agrees with as it feels that only those lenders who are up front and transparent should be allowed to operate.
Gavin Cooper, Co-Founder, Payday Choice says “We would welcome the opportunity to bring on board any payday lender who is willing to be clear in how it operates. Those who use our site can currently read information on all our lenders so they can make an informed decision before making an application.
If a lender would like to be part of this service and can demonstrate high quality operational practices, we would be very happy to talk to them. Competition in the payday industry means that the customer gets the best deal for their circumstances and that is why we are proud to offer this resource because it fulfils this need.”
Russell Hamblin-Boone, CFA chief executive says “Short-term loans are a vital financial lifeline for many people…the CMA’s proposed remedies combine well with the regulatory measures that lenders are putting in place as they protect choice, promote competition and make it tougher for rogue lenders.”
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