14:22 10 March 2013
According to the study carried out by Office of Fair Trading (OFT), poor practices were observed among the majority of payday loan firms.
Some of the irregularities include failure to determine whether borrowers can actually afford the loans, aggressive debt collection practices, failure to provide thorough explanation as to how repayments are collected, and lack of sufficient forbearance for borrowers who cannot afford the repayments.
For this reason, the OFT has ordered the biggest 50 firms to change or improve on their practices in 12 weeks otherwise, they will risk losing their licenses.
Clive Maxwell, the OFT's chief executive said: "We have found fundamental problems with the way the payday market works and widespread breaches of the law and regulations, causing misery and hardship for many borrowers."
The government already set out plans to correct the problem. Among them is to make new restrictions on how lenders can advertise.
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