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Payday Loans, Pawnbrokers Need More Than Regulation, OFT Says
By Erik Larson Published: 06/15/2010
June 15 (Bloomberg) -- A British competition regulator said the 7.5 billion pound ($11 billion) market for high-cost payday loans, pawnbroking and rent-to-buy products may have “deep seated” problems that can’t be fixed through regulation.
While the industry works well by serving customers who can’t get loans from “mainstream” lenders, problems such as a lack of choice and the financial weakness of some customers can’t be repaired by price controls or other rules, the Office of Fair Trading said today in a statement in London.
“More radical approaches which are beyond the OFT’s remit would be required if the government or others wanted to tackle the wider social, economic and financial context in which high- cost credit markets exist,” the OFT said in the statement.
The OFT has been investigating the financial industry since the global credit crisis started. Last week the watchdog began a study of the market for equity underwriting and rights offerings that generated 2 billion pounds for securities firms last year. That followed a study of barriers preventing competition in the retail banking industry and a failed attempt to examine the fairness of bank overdraft fees.
In March, the U.K.’s independent government auditor said the OFT isn’t bringing enough market-enforcement actions to build case law in the country and benefit consumers.
--Editors: Anthony Aarons
To contact the reporter on this story: Erik Larson in London at elarson4@bloomberg.net.
To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.
