Call for action on payday loans
July 26, 2008
Debt advice groups are calling for urgent action over payday loans that charge extremely high interest rates.
They want the market regulator to make lenders behave responsibly, as some companies have lent money at a rate equivalent to almost 2,000% annually.
Payday loans typically involve a lender advancing a customer cash, usually for a month, against a post-dated cheque.
The Office of Fair Trading (OFT) said they would be covered by investigations of the issue of responsible lending.
Although the loans, often used by people to tide themselves over until they get their wages, generally attract high rates of interest, the businesses offering them are properly licensed and they say they are professional and responsible.
One company providing payday loans, The Money Shop, told BBC Breakfast it offered a valuable service to those “who may alternatively be faced with high unauthorised overdraft costs”.
It said the cost of its lending products reflected the levels of risks it took.
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