rules mean that payday lenders must publish their details on price comparison
websites, so that prospective borrowers can be sure they are getting the best
deal – and that has to be good news for consumers.
In its report into the industry, the Competition and Markets Authority (CMA) said that, while most borrowers do not shop around, they could benefit from doing so.
At the moment, none of the big price comparison websites offers consumers the chance to look at different prices of payday loans online, but some have already suggested that they may do this in the future if the right conditions were in place.
Two websites have said they would potentially think about launching a payday loan comparison function in the medium or long-term. The Financial Conduct Authority (FCA) said it had been approached by sites who had an interest in running a payday loan price comparison website.
But even if none of these websites decides to take on the role of offering loan comparisons, lenders will have to establish a price comparison website themselves, and it will be regulated by the FCA.
The CMA hopes several comparison services will be listing loan providers before long, while ideally at least one would not have any connection with the industry, in the interests of impartiality.
Only online providers will be obliged to list their loans on a comparison site, but High Street lenders will also be entitled to do so.
At the same time, all existing borrowers will have to be supplied with a summary of how much their borrowing has cost, making things clearer and increasing peace of mind.
The CMA has also highlighted one customer poll that found that 60% of payday borrowers specifically take out these kinds of loans because they are so convenient.
What’s more, you never have to repay in charges a greater sum than that initially borrowed, even if you are unable to repay the debt by the deadline. Equally, charges and fees on loans cannot be more than 0.8% daily.
Together with recent caps placed on lenders’ charges, this should give consumers renewed confidence in this type of short-term borrowing.
After all, according to consumer group Which?, some 880,000 households a month took out a payday loan in 2014.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk