Summit to discuss payday lenders

Payday lenders, charities and Government ministers will be brought together next week to tackle the "widespread" problems found in the loan industry.

Consumer Minister Jo Swinson will host the summit to discuss whether plans in the pipeline for tougher regulation of the £2 billion sector will be enough.

The meeting will take place days after a decision to be announced by the Office of Fair Trading (OFT) this Thursday on whether it plans to refer payday lenders for a full-blown investigation by the Competition Commission.

The OFT previously uncovered evidence of "widespread irresponsible lending" and said the problems it had found were "deep-rooted", with lenders encouraging customers to roll over expensive loans and sink further into debt. New regulator the Financial Conduct Authority (FCA), which has powers to step in quickly and stamp out problems, will oversee payday lenders from next April.

The payday sector has come under heavy criticism in recent months, with debt charities accusing lenders of being "out of control" by handing out cash to people who cannot afford to repay loans, 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.

The meeting will discuss whether the FCA's powers are sufficient to deal with the problems found. If the FCA's rules are broken, the regulator can impose unlimited fines and claw consumers' money back.

The Department for Business confirmed that plans for a meeting next Monday are under way but it could not give any further details at this stage. The Consumer Finance Association, which represents short-term payday lenders, said that it plans to attend the meeting, adding that it welcomes "open conversation and dialogue".

StepChange - which named London, Cardiff, Liverpool, Leicester and Birmingham as the UK's payday lending "flashpoints" on Tuesday - also said it will be represented. The charity said that these areas have seen particularly large spikes in the typical size of a problem payday loan debt over the last couple of years.

Between 2011-12, the average payday loan debt of someone seeking StepChange's help has risen by £390 to £1,657. Delroy Cornialdi, external affairs director for StepChange, said: "The payday loan industry is beset by a variety of problems which require prompt action from regulators, politicians and the industry itself."

Beware the small print

Beware the small print