Payday lending market investigation

The CMA investigated the payday lending market and has published its final order.

From:
Competition and Markets Authority
Published
13 August 2015
Case type:
Markets
Case state:
Closed
Market sector:
Financial services
Outcome:
Markets - phase 2 adverse effect on competition leading to remedies
Opened:
27 June 2013
Closed:
13 August 2015

Remedies implementation timetable

The Payday Lending Market Investigation Order 2015 requires online payday lenders to publish, by 26 May 2017, details of their products on at least one price comparison website which is authorised by the Financial Conduct Authority. It also requires online and high street payday lenders to provide existing customers with a summary of their cost of borrowing.

(*) The remedy implementation administrative timetable published below on 26 March 2015 is indicative and has no statutory basis. Any revision of the timetable will be published on this webpage.

Remedy implementation date Action
22 December 2015 Extended statutory deadline for implementing remedies, if required for special reasons
23 August 2015 Statutory deadline for implementing remedial action
July to August 2015 Order comes into force
July to August 2015 Finalise and make order
April to May 2015 Formal public consultation on draft order
March to April 2015 Informal consultation on draft order with key parties
24 February 2015 Final report published

Phase 2

Date of referral: 27.6.13 Statutory deadline: 26.6.15

Final order

13 August 2015: The CMA has published its final order following its investigation into the payday lending market.

Draft order consultation

Final report

Amendments to proposed remedies consultation

19 December 2014: The CMA has published a consultation paper on amendments to the price comparison website (PCW) and the statement of borrowing remedies. The consultation has now closed.

Provisional decision on remedies

9 October 2014: The CMA has today published its provisional decision on the package of remedies required to remedy the adverse effect on competition (AEC) and the resulting customer detriment it has provisionally found. It has also launched a consultation on an addendum to its provisional findings report, and published its customer research with payday lending customers. The consultation has now closed.

Variation of the terms of reference

Remedies research – invitation to comment on potential suppliers: Now closed

Provisional findings and possible remedies

Analysis

Working papers

Working Papers are published to invite comments and assist the Inquiry Group develop its thinking on key areas. They should not be considered as containing the Group’s definitive views. For further information see the CCs Guidelines for Market Investigations (PDF, 675 Kb), draft for public consultation, in particular paragraphs 56 and 57.

Evidence

Responses to the draft order consultation

Responses to the proposed remedies consultation

Responses to the provisional decision on remedies

Summaries of response hearings held with parties

Responses to provisional findings and Notices of possible remedies / a request for a variation of the terms of reference

Responses the CMA has received from organisations to provisional findings, the Notice of possible remedies and the Notice of request for a variation of the terms of reference.

Responses to Annotated Issues Statement and Working Papers

CC-commissioned research

Summaries of hearings held with parties

Responses to issues statement

Submissions

Invitation to comment on agencies invited to tender on research: Now closed

Issues statement

Terms of reference

Market investigation reference group

Inquiry Group: Simon Polito (Chairman of the group), Katherine Holmes, Ray King, Tim Tutton

Case opened

Press release: CC to investigate payday lending market 27.6.13

Phase 1

Date of reference: 27 June 2013

Summary of work

On 6 March 2013, the OFT published a consultation document setting out its provisional decision to refer the payday lending market in the UK to the CC and opened a public consultation. The consultation document identified a number of features that the OFT suspected were - either individually or in combination - preventing, restricting or distorting competition in this market. The public consultation closed on 1 May 2013.

On 27 June 2013, the OFT announced its final decision to refer the market for payday lending in the UK to the Competition Commission (CC) for a market investigation. Having considered responses to the consultation, the OFT remained of the view that there were reasonable grounds for suspecting that features of the payday lending market were preventing, restricting or distorting competition.

The features identified by the OFT were:

Variability in compliance

The OFT Compliance Review found varying levels of non-compliance with relevant law and guidance by payday lenders. The OFT suspects that those firms which invest more time and effort in complying may be placed at a competitive disadvantage to those which invest less.

Lack of cost transparency

The OFT has identified practices which make it difficult for consumers to identify or compare the full cost of payday loans effectively at the point when loans are taken out. The OFT suspects that these practices undermine price competition by rendering consumers as a whole less effective at constraining prices.

Price insensitive customers

A significant proportion of payday borrowers have poor credit histories, limited access to other forms of credit and/or pressing needs. This may make them less price sensitive which, the OFT suspects, weakens price competition between payday lenders.

Barriers to switching

There are barriers to switching between payday lenders or to alternative products or options at the point of rollover. The OFT suspects that these barriers benefit incumbent lenders and prevent, restrict or distort competition from possible alternative lenders at the point of rollover.

Market concentration

The OFT suspects that high concentration and barriers to entry and expansion exacerbate the prevention, restriction or distortion of competition arising from the features identified above.

Action

The OFT, in exercise of its powers under Sections 131 of the Enterprise Act 2002 (the Act), referred the supply and of payday loans in the UK to the CC for investigation.

Core documents

Updates to this page

Published 13 August 2015
Contents

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