MPs announced that in their view Office of Fair Trading does not do enough in order to protect consumers from unscrupulous payday loan companies, which do not have proper loan agreements.
According to the chairperson of the Public Accounts Committee due to the wrong policy of OFT borrowers lose £450m a year.
In her words, the regulator had to use more often its powers to revoke the credit licenses of misbehaving lenders.
She said: “It passively waits for complaints from consumers before acting.”
And added that none of the 72,000 firms currently in the market had ever been fined.
In the cases in which the license of a certain director( who is supposed to have a directors service contract) had been withdrawn the same person does not stop their business but just starts it up under a different name.
The OFT said there were tight constraints that stopped them to a certain extent but they were doing their best in order to cope with the situation.
A spokesman said: “In the last financial year alone the OFT has revoked the licences of some of the UK’s largest credit brokers and debt management firms, and taken formal action in more than 85 other cases.”
As the Financial Conduct Authority will receive the regulatory duties next year the committee decided to give some suggestions which in their view would be helpful for the future.
One of the proposals said that not only the annual percentage rate had to be displayed but also the total amount repayable on a loan. Another of the proposed changes was related to the number of times short-term loans could be “rolled over” by lenders.