Absence of competition between payday lenders has been criticized by the Competition and Markets Authority (CMA), following the release of the provisional findings of their investigations into the market.
The research included the analysis of 15million payday loans taken out between 2012 and 2013. Results showed that the ability to compare lenders could save the average customer £30-£60 a year, and for a £100 loan the variations in costs can reach £30.
UK customers have over 90 providers of payday loans to choose from, though CashEuroNet, Dollar and Wonga are the three largest lenders, accounting for 70% of total revenue in that market.
Within their research of payday loan customers over the past 5 years, they found that 52% had experienced debt problems including county court judgements and visits from bailiffs, and that typically the choice of lender was based on the speed and availability of the loan, with the majority struggling to compare lenders or not comparing them at all.
The CMA are now looking into ways in which to increase competitions within the sector, including an independent price comparison website, greater transparency about lead generators within the industry and a clearer disclosure of borrowing costs. They also want to assess the feasibility of changes to help customers to allow customers to search for credit without it affecting their credit rating, to make it easier for people to ascertain their own creditworthiness.
If you are struggling to pay back your payday loans, talk to one of our advisers today, to see if you could benefit from one of our financial solutions.