The Office of Fair Trading (OFT) has imposed requirements on payday lender Safeloans Limited, trading as Paydayok.
The requirements imposed on Paydayok follow similar action announced last month against CIM Technologies Ltd, trading as Toothfairy Finance.
The OFT has warned payday lenders that they must not misuse direct debit facilities to vary the amount or date of a loan repayment.
Direct debt facilities are used by some payday lenders to give them greater control over the repayment of the short-term loan. This means that if a borrower defaults on the loan, the lender can make multiple attempts to take money from the borrower’s account without agreeing specific amounts or dates with the borrower.
The OFT believes that some lenders use this ‘continuous authority’ as a way to bypass proper checks on a borrower’s ability to repay. The OFT is also concerned that taking money from a debtor’s account when they are already in difficulty could prevent them from meeting priority debts, such as rent or mortgage payments.
Safeloans Limited typically offers same-day loans of £50-£400 on a short-term basis. The requirements now imposed by the OFT on the company state that it must only take money from the borrower’s account on the date or dates set out in the loan agreement, unless otherwise agreed with the borrower in advance and not change the repayment amount unless this has been specifically agreed with the borrower in advance.
The firm must only take money from an account specifically given to Paydayok for the repayment of that loan. Failure to comply with requirements can lead to a fine of up to £50,000 per breach, or action to revoke a company’s credit licence.
Ray Watson, the OFT’s director of consumer credit, said: “We have made it clear that we will not tolerate companies misusing repayment facilities and we will take action to ensure that unfair terms are not used. Those who offer payday loans must do so responsibly and in accordance with the expected standards.”””
