Two payday loan companies have been reported to the Office of Fair Trading (OFT), following a Which? Money investigation.
The consumer group says it uncovered “widespread” poor practice in the sector, including potential breaches of the Consumer Credit Act, poor privacy provisions and inflated interest rates.
Of the firms reported to the OFT, Paydaykong.com appeared to be operating without a valid Consumer Credit Licence, while Swiftmoney.co.uk failed to show the APR for its loans anywhere on its website.
The group’s investigations also mean that Casheuronet UK (operator of Quick-payday.co.uk) and Quickquid.co.uk have been reported to the Information Commissioners’ Office after a Which? researcher received dozens of unsolicited third-party emails and phone calls following his application, indicating that his details had been sold on.
Other examples of poor practice include potentially misleading claims about APRs, firms encouraging customers to borrow more than they need and customers being urged to roll-over existing loans for several months, Which? said.
The findings were rounded off with the discovery that several firms had lax website security, with one provider allegedly requiring customers to enter their bank details on an unsecured page.
Payday loan providers typically charge from £20 to £35 for a short-term £100 loan and the most expensive loan Which? found was offered by Wonga.com, which quoted £36.72 for a 30-day loan of £100, equivalent to an APR of 4,394%.
The same amount borrowed through an authorised overdraft from Co-operative Bank would cost just £1.35.
Which? executive director, Richard Lloyd, says: “Payday loans might seem like a good solution for people whose money won’t stretch to the end of the month, but they should be treated as an absolute last resort.”
He adds: “With increasingly squeezed household budgets, more people are taking out payday loans so it’s vital that regulators keep a close eye on providers and deal firmly with any lenders breaking the rules.”