The Office of Fair Trading (OFT) has warned payday lenders – legal loan sharks that charge up to 4,000 per cent APR – to clean up their act or face closure.

This follows the OFT uncovering significant amounts of evidence that the aggressive marketing and seriously shabby way the lenders treat their victims pushes many vulnerable families into a crippling spiral of debt. One example given by the OFT is the continuous payment authority that many lenders insist is signed by their borrowers, a document that enables the lenders to clean out the bank accounts of their victims if they are late in paying. A full report on the abuses is expected from the OFT this January.

Meanwhile website Mumsnet has banned advertisements from all payday lenders on the grounds that it does not want its name associated with them.

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