MPs in the UK have welcomed news that the UK's 50 biggest payday lenders had been put on a 12-week notice to change their ways or risk being put out of action, with the trading watchdog uncovering evidence of ''widespread irresponsible lending''.
However, the Office of Fair Trading (OFT), has been urged by one MP to proceed with caution. The OFT yesterday proposed to refer the payday market to the Competition Commission after finding ''deep-rooted problems'' in how lenders competed with each other.
The OFT found evidence that the 50 lenders, accounting for over 90 per cent of the market, were failing to comply with the prescribed standards.
The companies were at risk of losing their licences, which were needed in order to trade, if they failed to clean up their act.
However, some lawmakers have cautioned that removing legal lenders through well-meaning legislation and regulation would not reduce the demand for their services, and could push people to illegal "loan sharks" whose ways of operating were often utterly unacceptable and much worse for their customers.
Meanwhile, consumer campaigners have been calling for a crackdown to clean up the ''irresponsible'' credit industry after it came to light that a quarter of people who took out expensive payday loans were using them to plug other debts.