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Campaigns | Payday loans and overdrafts

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Payday lenders must cut their high fees

13th January

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.

Wonga top the fee tables

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.

Exploiting borrowers with excessive fees

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.'

Fair, proportionate and reflective

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'.


Labour would impose a levy on payday lenders

Ed Miliband today announced that Labour would impose a levy on payday lenders if the party came into power.

Payday lenders quizzed at government summit

Payday lenders faced government scrutiny today. Serious concerns were raised about payday lending and what the industry should do to protect their customers.

The OFT takes payday loans to the Competition Commission

The Office of Fair Trading (OFT) confirms that it has referred the £2bn payday loan sector to the Competition Commission.

Government promises to clamp down on credit

The government has today announced plans to impose tougher restrictions on payday lenders, following a year-long investigation by the Office of Fair Trading (OFT).
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