We believe payday lenders are acting unlawfully by charging excessive default fees so we're calling on lenders to cut their high fees.
Ten of 17 leading payday lenders we looked at have default fees of £20 or more, and four charged £25 and above, with Wonga topping the table at £30.
Which?'s legal opinion is that excessive default fees are unlawful under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs). This regulation states it is unfair for lenders to charge a disproportionately high fee if borrowers default on a loan.
We've written to the worst offenders to challenge the level of their default fees, which we believe should be no higher than the administrative costs associated with defaulting.
High charges are one of the biggest factors that tip borrowers into a spiral of debt - so we believe it's time for action. You can help by signing our petition.
Richard Lloyd, executive director at Which?, said:
'If they cannot justify why these charges are so high and refuse to cut them, we would look to take further steps to protect vulnerable consumers. The regulator must also take action to ensure all fees are fair, proportionate and only reflect lenders' costs.'
Previous Which? research has found that more than half of payday loan users (56%) had incurred charges for missed or bounced credit repayments over 12 months, compared to 16% for all credit users. One in five payday users (20%) said they had been hit with 'unexpected charges'.