Payday loan interest rates on price comparison sites

In an ongoing effort to protect households from high priced lenders, the Competition and Markets Authority is continuing to put more protections in place for customers. Changes being implemented in partnership with the Financial Conduct Authority, such as requiring payday lenders to publish their late fees and list their interest rates for loans on comparison websites, should continue to drive costs down for borrowers.

The new changes will make it easier for borrowers to shop around for financing. They will now know exactly how much they will need to pay in order to borrow money from any lender, whether it is a payday company such as Wonga or some other company. All of the information that is to be provided to them will need to be objective and the new comparison service will not recommended any particular company.

New rules from Competition and Markets Authority

The aim is to reduce costs to consumers and provide them much easier access to information on what exactly is involved if they decide to borrow money. With over one million families across the UK turning to these lenders each year, the savings to borrowers can be substantial. This addresses all payday lenders, including Money Shop, Dollar, Quick Quid, Payday UK, Wonga, Peachy, Sunny, and CashEuroNet. In total, almost 100 companies are impacted. Some of the new rules being put into place are as follows.

• Payday lenders will need to publish the interest rates and all their prices on one or more price comparison websites.
• All companies will also need to tell borrowers what any late fees will be, and this information also needs to be listed.
• If a lender has any hidden charges, those will now need to be told to consumers. So in effect these hidden fees will not longer be allowed.
• Information will need to be provided that show the cost of borrowing with that lender built up over the previous 12 months.
• Expenses associated with late repayments on the loan need to be provided too.

All high priced lenders will need to provide a clear summary to potential borrowers. It will need to list all of the interest rates, terms, and conditions. The document needs to be precise. No matter what a lender may call these fees or any other charges, they will need to be listed on the summary.

It is expected that costs to consumers will continue to decrease. The thoughts behind these changes from the Competition and Markets Authority is that many companies, such as Wonga or CashEuroNet, will just charge rates set by the new price cap. However these new rules on transparency will now provide consumers more information to shop around, which should drive interest rates on any payday loan even lower than the recent caps put into place.

So called lead generator websites will also be impacted. Since they are involved in issuing about 40 per cent of any type of loan to consumers, they too will need to list the interest rates being charged. If the sites works with any payday lenders, then they also need to participate in this new comparison service.

This will help ensure borrowers get the cheapest rates from the numerous providers that operate in the UK. The price competition being created as a result of these new rules will give more incentive to the lenders to become more efficient and to also lower interest rates being charged.