Competition Commission publishes payday lending working papers: The Competition Commission has updated on the progress of its market investigation into payday lending. It has also published working papers which flag up the competition issues on which it is focusing. The working papers cover:

  • Payday loan products. This paper sets out a working definition of payday loan and description of eligibility for them, in order to provide an explanation of the position of payday loans within the credit sector.
  • Competition between payday lenders and other credit providers. The paper finds that credit cards and overdrafts share characteristics with payday loans but consumers are mostly unable to switch to these products due to their reduced access to mainstream credit. The Competition Commission has found little evidence of payday lenders adjusting their product offering in response to actions by providers of alternative, non-pay lending products.
  • Review of the websites of payday lenders and lead generators. This paper expresses concerns about lead generators' lack of transparency towards customers on the role they play and the commission they earn. In some cases lead generators claimed that, with them, customers would be spared the need to shop around, which customers could misinterpret as meaning that they were being matched with the "best value" loans for them.
  • Competition in product innovation. This paper discusses non-price innovations, such as those affecting access to credit and flexibility in their repayment.
  • An outline of the legal and regulatory framework applying to payday lending.
  • A description of the main payday lending companies.

The Competition Commission asks for comments on the issue statement and working papers by 28 February. The provisional findings of the market investigation are expected in May/June. (Source:Annotated Issues Statement and Working Papers)