Finance: Payday Loans

House of Lords written question – answered on 10th February 2012.

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Photo of Lord Kennedy of Southwark Lord Kennedy of Southwark Opposition Whip (Lords)

To ask Her Majesty's Government what assessment they have made of the incidence of payday lending as a major source of borrowing, as suggested in the PricewaterhouseCoopers report, Precious Plastic 2012.

Photo of Baroness Wilcox Baroness Wilcox The Parliamentary Under-Secretary of State for Business, Innovation and Skills

The Government acknowledge that there are real concerns about payday lending and some of the practices that appear to blight this market. Payday lending is a key area of regulatory focus for the OFT and it monitors the market for evidence of consumer detriment. They have taken enforcement action against a number of companies in this market but as the market has increased in size it has seen an increase in consumer harm. The OFT will be launching a compliance review of its Irresponsible Lending Guidance that will focus on the payday market and identifying those practices that are the cause of most harm to consumers and the findings will be used to take further enforcement action and drive up standards in this market.

BIS published Credit, Debt and Financial Difficulty in Britain, 2009/10 in June 2011. The aim of the report is to explore credit use and the extent of consumer indebtedness in Britain over the 12 months from November 2009 to October 2010 and changes since the previous 2010 report, which covered the period from July 2008 to July 2009. The most recent survey, which is available via the BIS website, found that there had been a decrease in the proportion of households using unsecured credit and that the level of financial difficulty may be declining. The survey also showed that 2 per cent of those sampled used high cost credit products. The next survey, covering the period November 2010 to October 2011 will be published in June 2012.

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