Payday lenders must allow price comparison, CMA says
Payday lenders must make their product details available on at least one price comparison website to encourage greater competition, the Competition and Markets Authority (CMA) has said.
It found most borrowers did not shop around for loans.
Payday lenders must also give current borrowers a loan summary, explaining the total cost of their loan.
The decision follows a 20-month investigation aimed at reforming the controversial payday lending market.
"Our actions are aimed at making the market more competitive and further driving down costs for borrowers," said Simon Polito, chair of the CMA's Payday Lending investigation group.
"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 also recommends:
- greater transparency on late fees and charges
- measures to help borrowers shop around without damaging their credit records
- expanding real-time data sharing services to help new lenders assess credit risks more accurately
- that websites selling potential borrowers' details to lenders should explain their role much more clearly.
Currently details of payday loans are not available on price comparison websites.
However, the CMA said it had already had discussions with existing price comparison websites about the new rules and believed "one or more commercial" websites will emerge.
If not, it said payday lenders would be forced to set up a price comparison website, authorised by City regulator the Financial Conduct Authority (FCA), themselves.
The CMA's recommendations follow the introduction of a cap on the cost of payday loans enforced by the FCA, which came into effect in January.
Payday loan rates are now capped at 0.8% per day of the amount borrowed, and no-one will have to pay back more than twice the amount they borrowed.
Mr Politio said the FCA's price cap would reduce the overall level of prices, but said these further changes would ensure that the cap "does not simply become the benchmark price set by lenders for payday loans".