Less than two-thirds (65%)of payday loans are fully paid back on time or early, research for the Competition Commission has found.
The Commission, which is carrying out an industry-wide probe following reports of "deep-rooted" problems in the payday sector, has published a progress report.
The report said that repeat use of payday loans, either by rolling one over or taking out another loan, is "prevalent". It has also found seven out of 10 customers reported that they had not shopped around before taking out their most recent loan, and six out of 10 said they had never done so.
Looking at "repeat customers", the Commission said around half of customers who have never taken out a loan with a given lender before either end up either rolling over their first loan or borrowing more money from the same lender within 30 days of the original loan.
The Commission found that the biggest players in the sector - Wonga, DFC Global Corporation and Cash EuroNet - account for most loans issued.
The Commission is considering whether firms would find it harder now to enter the market or expand than when the major lenders did.
From April, new regulator the Financial Conduct Authority (FCA) will start to oversee payday firms.
The FCA has announced plans to crack down on the sector, including limiting the number of times payday lenders are allowed to roll over loans to twice, forcing them to put "risk warnings" on their advertising and limiting the number of attempts lenders can make to claw back money if there is insufficient cash in a borrower's bank account to two.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article