The trading watchdog is to announce whether it plans to refer "widespread" problems found with payday lenders for a full-blown investigation by the Competition Commission.
The Office of Fair Trading (OFT)'s decision is the culmination of a large-scale probe into the £2 billion payday sector, including spot checks on household names such as Wonga.It previously gave the 50 biggest players in the market a 12-week deadline to prove they were up to scratch or risk being put out of business.
The watchdog published a damning report into the sector in March, in which it outlined the evidence it had gathered of "widespread irresponsible lending". It said at the time that it was minded to refer the industry to the Commission, which has strong powers to ban or limit products and shake up whole markets.
The payday sector has been heavily criticised in recent months. Debt charities have accused lenders of being "out of control", by granting loans to people who cannot afford to repay them, emphasising the speed of loans rather than the cost and hounding people for debts.
More than 7,000 people who contacted debt charity StepChange last year had five or more payday loans - rocketing from just over 700 in 2009. Charities have also reported seeing cases where people were drunk when they took out the loan or had mental health issues.
They have raised concerns that penalty fees and charges piled on top of interest can also mean that the cost of the debt balloons out of proportion with the original loan for a struggling borrower. In one case seen by StepChange, a client faced a total debt of £1,830 for an initial loan of £120.
The OFT found ''deep-rooted'' problems such as lenders encouraging customers to roll over expensive loans and sink further into debt. It said the issues raised were industry-wide, causing ''misery and hardship'' for borrowers. Language used by lenders to reel in customers such as ''Instant cash'', ''Loan guaranteed'' and ''No questions asked'' could either be misleading or, if true, were a sign of irresponsible lending, the OFT warned.
It said that payday lenders appeared heavily reliant on struggling customers who are in a ''weak bargaining position'' and cannot afford to pay their loans back on time. It found that around half of lenders' revenues come from loans which had been rolled over or refinanced.
Payday lenders, charities and Government ministers will be brought together next week to tackle the problems found in the industry. Consumer Minister Jo Swinson will host a summit on Monday to discuss whether plans in the pipeline for tougher regulation of the sector will be enough.
Wonga has previously said that only a small proportion of its loans are extended and they do not provide ''anything like'' the revenues described for the whole industry by the OFT. It has described itself as being ''instrumental'' in helping to raise industry standards. Of the 50 lenders that the OFT contacted, two have surrendered their licence and one has told the watchdog that it is leaving the payday market.
The Office of Fair Trading (OFT)'s decision is the culmination of a large-scale probe into the £2 billion payday sector, including spot checks on household names such as Wonga.It previously gave the 50 biggest players in the market a 12-week deadline to prove they were up to scratch or risk being put out of business.
The watchdog published a damning report into the sector in March, in which it outlined the evidence it had gathered of "widespread irresponsible lending". It said at the time that it was minded to refer the industry to the Commission, which has strong powers to ban or limit products and shake up whole markets.
The payday sector has been heavily criticised in recent months. Debt charities have accused lenders of being "out of control", by granting loans to people who cannot afford to repay them, emphasising the speed of loans rather than the cost and hounding people for debts.
More than 7,000 people who contacted debt charity StepChange last year had five or more payday loans - rocketing from just over 700 in 2009. Charities have also reported seeing cases where people were drunk when they took out the loan or had mental health issues.
They have raised concerns that penalty fees and charges piled on top of interest can also mean that the cost of the debt balloons out of proportion with the original loan for a struggling borrower. In one case seen by StepChange, a client faced a total debt of £1,830 for an initial loan of £120.
The OFT found ''deep-rooted'' problems such as lenders encouraging customers to roll over expensive loans and sink further into debt. It said the issues raised were industry-wide, causing ''misery and hardship'' for borrowers. Language used by lenders to reel in customers such as ''Instant cash'', ''Loan guaranteed'' and ''No questions asked'' could either be misleading or, if true, were a sign of irresponsible lending, the OFT warned.
It said that payday lenders appeared heavily reliant on struggling customers who are in a ''weak bargaining position'' and cannot afford to pay their loans back on time. It found that around half of lenders' revenues come from loans which had been rolled over or refinanced.
Payday lenders, charities and Government ministers will be brought together next week to tackle the problems found in the industry. Consumer Minister Jo Swinson will host a summit on Monday to discuss whether plans in the pipeline for tougher regulation of the sector will be enough.
Wonga has previously said that only a small proportion of its loans are extended and they do not provide ''anything like'' the revenues described for the whole industry by the OFT. It has described itself as being ''instrumental'' in helping to raise industry standards. Of the 50 lenders that the OFT contacted, two have surrendered their licence and one has told the watchdog that it is leaving the payday market.