Consumer watchdog to investigate payday lenders

Britain’s payday lenders are to be investigated by the consumer watchdog amid fears they are preying on those in financial trouble.

The Office of Fair Trading (OFT) will carry out spot-checks of 50 major lenders and said it would look into concerns that people are being given loans without the proper checks being carried out.

It will investigate whether firms target people unsuitable for credit and are rolling over loans so that the charges escalate and they become unaffordable. The sector has exploded in size in recent years, with new players arriving from the US. Analysts have suggested that the innovation shown by such lenders could see them eclipsing credit card companies.

Lenders like Wonga.com, the Money Shop and Quick Quid have gained increasingly high profiles to become household names. The watchdog has not named the firms it plans to investigate but said they will include the “biggest players”.