payday loansPayday loan providers are flouting the Consumer Credit Act, sharing customers' personal information without their consent and misleading people about the cost of their borrowing, according to a new investigation from consumer champion Which?.

It has reported two lenders to the Office of Fair Trading (OFT) after finding the sector, which targets potentially vulnerable consumers struggling to make ends meet, riddled with poor practice.


Payday loans, which typically last for 30 days and are designed to tide borrowers over until their next pay day, usually cost between £20 and £35 - based on a loan of £100. However, some providers charge more than this.

The most expensive Which? found was offered by Wonga, which quoted £36.72 for a 30-day loan of £100 - equivalent to an APR of 4,394%.

But the same amount borrowed through an authorised overdraft from the Co-operative Bank, for example, would cost just £1.35, while Santander current account customers could get the £100 they need to tide them over for nothing.

The poor value of payday loans is not the only issue, though. As a result of its investigation, Which? also reported two lenders - Paydaykong and Swiftmoney - to the OFT for either apparently operating without a valid Consumer Credit Licence or failing to show the APR for the loans on offer.

Casheuronet UK, which operates Quick-payday and Quickquid, was reported to the Information Commissioners' Office too after a Which? researcher received dozens of unsolicited third party emails and phone calls in the days following his loan application.

Other examples of poor practice included firms encouraging customers to borrow more than they need and to rollover existing loans for several months and insufficient website security given that customers were required to enter their banks details to receive the cash.

Which? executive director Richard Lloyd said: "With increasingly squeezed household budgets, more people are taking out payday loans. However, while they might seem like a good solution for people whose money won't stretch to the end of the month, but they should be treated as an absolute last resort.

"They can be an incredibly expensive way to borrow and we've uncovered a long list of poor practice by lenders. A temporary overdraft extension can be a much cheaper, safer way to borrow."