Overview

Recently there has been a proliferation of online providers of so-called micro loans. These are relatively low value loans (sometimes referred to as payday loans typically £50-£300 which are repayable within a very short time, usually no more than 30 days later. One of the most prominent recent examples is the service provided by Wonga. This article looks at some of the reason why this proliferation has taken place and speculates on the future regulation of this kind of business.

In April last year, the Office of Fair Trading published a report into the market for microloans. Its conclusions were broadly positive. The OFT found that in a number of respects, these markets were working reasonably well, for example, suppliers have met the demand for easier access to their products and complaints to the OFT are low. However, the OFT did have concerns on whether there was enough competition within the market. The OFT made several recommendations such as that the Government helps consumers make informed decisions and that the relevant trade associations promote best practice.