Dec. 20 (Bloomberg) -- U.K. lawmakers called for further action to be taken to regulate payday lenders, saying current proposals don’t go far enough to protect consumers.
A report published today by the House of Commons Business, Innovation & Skills Committee suggested payday loans should only be allowed to be rolled over once, not twice as currently planned, and advertising for the loans should be banned from all children’s television programs. The existing proposals are due to be implemented on April 1.
“It is clear that consumers are increasingly at risk from payday loans,” Adrian Bailey, the opposition Labour Party lawmaker who heads the committee, said in a statement. “The rapid expansion of the payday-loan sector has been accompanied by a significant increase in the number of people experiencing serious debt problems. The two are not unrelated.”
Payday lenders typically charge high interest rates for small cash sums over shorter periods than a bank loan. The industry’s loans cost an average of 25 pounds ($41) per 100 pounds for 30 days, the Office of Fair Trading said in March.
The lenders have come under increased scrutiny from the government amid calls to tighten the legislation that governs them. The Financial Conduct Authority is set to implement a new regulatory framework for payday lenders when it takes over from the OFT in regulating consumer credit on April 1.
Chancellor of the Exchequer George Osborne last month yielded to calls led by Labour lawmakers for the cost of payday loans to be capped. A survey of 2000 people carried out by the Money Advice Service in October showed 1.2 million people were planning to take out payday loans before Christmas.
The payday-loan market increased to between 2 billion pounds and 2.2 billion pounds in the 2011-12 financial year, more than double its value in 2008 to 2009, the panel said.
--Editors: Eddie Buckle, James Hertling