UK watchdog wants comparison sites for payday lenders

Britain’s competition watchdog wants to introduce price comparison websites for short-term lenders to improve the deals on offer for borrowers.

The Competition and Markets Authority (CMA) said on Thursday the move would ensure a price cap set to be imposed on the industry by the Financial Conduct Authority (FCA) did not become the default rate for lenders.

The FCA said in July it would cap sky-high interest rates offered by so-called “payday lenders” in Britain, to bring down the cost of short-term loans criticised for causing misery among borrowers.

The CMA said on Thursday that, as a condition of their participation in a market which serves 1.8 million customers, payday lenders would be required to provide details of their products on websites that would allow borrowers to make quick and accurate comparisons between loans.

The watchdog said that would stimulate greater price competition in a market where many customers currently do not shop around -- partly because of the difficulty in finding clear information on the cost of borrowing.

The lenders and other interested parties have until the end of this year to respond to the CMA’s proposal.

Wonga, Britain's biggest payday lender, charges an annual interest rate of 5,853 per cent, according to its website. The firm said last week it was writing off the debt of 330,000 customers worth about £220 million, after being forced to overhaul its lending practices.

Andrea Leadsom, a member of the government with responsibilities for financial services, said on Thursday the government was "determined to tackle the problems in the payday lending market and protect consumers".

The CMA said it was talking to existing price comparison websites about its proposal.

Reuters