UK to use comparison sites to keep payday lenders in check
New regulations will force lenders to advertise at least one comparison website.
Regulators in the UK are using comparison websites to help keep the controversial payday loan market in check. New rules, set to come into force on Friday, will force payday lenders to "prominently" display a link on their own websites to a price comparison website where their loan is compared with others.
The rules have come into force as a result of an investigation by the Competition and Markets Authority (CMA).
In January 2015, a cap came into effect that restricted the maximum interest rate that could be charged on a payday loan to 0.8% per day. The cap was introduced by the Financial Conduct Authority (FCA), which placed £15 limit on default fees and capped the total cost of a payday loan to 100% of the amount borrowed.
This brought loan costs in a similar line to what is charged in Australia, as borrowers would not charge more than £24 per £100 borrowed for a 30-day loan (in Australia you cannot be charged more than $24 per $100 borrowed). This cost cap is currently under review in the UK.
According to the BBC, the industry has "already complained about the increasing regulations", but prominent lenders, including Wonga, have already started including links to comparison websites.
While there are no plans to introduce similar legislation in Australia, you can compare short-term lenders on finder.com.au to get an understanding of costs before you apply.