UK tightens ‘payday loan’ rules to protect small borrowers

The UK government today announced stricter rules for high-cost, short-term lenders, often referred to as 'payday sharks'.

After a year-long investigation by the Office of Fair Trading (OFT), authorities have suggested that such lenders will face advertising curbs and be under closer supervision.

The government wants to limit the number of adverts shown per hour on TV and ensure the terms and conditions are displayed more prominently.

Many payday lenders' advertisements feature heavily on television and the internet.

The loans can be of hundreds of pounds for a few weeks with minimum scrutiny or collateral demands; but interest rates can amount to thousands of per cent on a yearly basis.

The phenomenon of 'payday loans' occurs across many developed economies, including the USA. Borrowers typically expect to repay the loan by the next week; but often overstretch their financial capacity.