By Mark Kleinman, City Editor
The competition watchdog will on Thursday outline plans for a clampdown on the middlemen who arrange payday loans in an attempt to drive down the cost of short-term credit.
Sky News has learnt that the Competition and Markets Authority (CMA) will announce that it is amending the terms of reference of its investigation into the payday lending sector to include the lead generators responsible for arranging a substantial proportion of the loans made each year.
It is expected to say that it favours changes to their operations that would make them more transparent to consumers.
The announcement will form part of a broader statement by the CMA setting out the provisional remedies designed to improve competition in the under-fire sector.
The watchdog said in June that its board would decide during the summer whether to modify its investigation to include loan intermediaries, and sources indicated on Wednesday that it had opted to do so.
Simon Polito, the CMA director leading the probe, said in June: "We found that 40% of new online borrowers take out their first loan with a lender via a lead generator, but the way in which these companies earn their money – by selling customer applications to the highest bidder – is often not made clear on their websites and some customers are unaware that these companies are not actually providing the loan.
"We want customers to know who they are really dealing with, and the basis on which their applications are being matched with lenders, so that they can make informed choices."
One insider said that the CMA had also begun discussions with prospective creators of a new independent price comparison website for the payday lending industry, underscoring the regulator's commitment to making such a measure a central part of its final recommendations.
The CMA, which has said that its proposed reforms could save the average customer £60 each year, declined to comment ahead of its announcement.
Its proposals, which represent the penultimate phase of its investigation, will come at a time of unprecedented turbulence for the sector.
Wonga, the UK's biggest provider of short-term credit, has in recent weeks been forced to write off £220m of loans following discussions with the Financial Conduct Authority (FCA) about some of its business practices.
The company also reported a slump in profits and this week had one of its advertisements banned by watchdogs because it had failed to set out clearly the cost of its loans.
The FCA has already forecast that its own reforms, including a daily 0.8% cap on the cost of loans, will lead to a radical reduction in the number of short-term credit providers.
It is consulting on those proposals and is expected to confirm them early next month ahead of their introduction in January.
The FCA has already forecast that its own reforms, including a daily 0.8% cap on the cost of loans, will lead to a radical reduction in the number of short-term credit providers.
It is consulting on those proposals and is expected to confirm them early next month ahead of their introduction in January.
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