as fears grow over massive profits from loans to poor borrowers

The controversial payday loans industry is set to face a full investigation from the Competition Commission over concerns that it makes huge profits from consumers who cannot afford the loans in the first place. The Office of Fair Trading is already holding its own inquiry, but is expected to refer the industry to the Competition Commission, which has far stronger powers to restrict or ban activities against the consumer interest. The OFT is believed to be concerned that there is no legal power to restrict ‘irresponsible’ lending to borrowers who struggle to pay back even small loans. Payday lenders make up to half their revenue from charges levied when customers default and on loans that accumulate into larger debts when borrowers fail to repay on time, the OFT has said. Firms typically charge £25 for a 30-day £100 loan. Interest rates can exceed 4,000 per cent a year, and that does not include extra charges or penalties when borrowers fail to pay their debts......Read more here