In the Report, the Business, Innovation and Skills Committee welcomed the increased focus on the payday loan sector but warned that further action is needed to protect consumers.
Recent research by Ofcom revealed that payday loan advertising is prevalent on children’s television and the Committee has now called for such adverts to be banned.
Adrian Bailey MP, chair of the Business, Innovation and Skills Committee, said: “The Money Advice Service suggests that 1.2 million people plan to take out payday loans to cover the cost of Christmas.
“The evidence we heard suggests they should think very carefully before doing so. Inadequate affordability checks, unacceptable targeting and inappropriate use of rollovers all are symptoms of a payday loans sector in urgent need of overhaul.
“The rapid expansion of the payday loan sector has been accompanied by a significant increase in the number of people experiencing serious debt problems. The two are not unrelated. It is clear that consumers are increasingly at risk from payday loans.
“The number of payday loan adverts seen by 4-15 year olds has increased from 3 million in 2008 to 596 million in 2012.
“This means that last year the average child was exposed to 70 payday loan adverts. It is worrying that our children are being exposed to such an extent to adverts that can present payday loans as a fun, easy and appropriate way to access finance. Children's programs are simply not an acceptable place for payday loan adverts.”
The Committee recommended that all payday loan companies should be required to resubmit their affordability tests to the FCA for approval before they can continue in the sector.
It also said that the FCA should make clear that if real-time data sharing has not been established by July 2014 it will mandate its use as a condition of trading in the sector.
Bailey said: “Despite the apparent support of the industry, progress in establishing real time data sharing has been excruciatingly slow.
“This is concerning given that real time sharing of data is essential in preventing people from taking out multiple loans from multiple payday loan providers.
“If the industry has not established real time data sharing by July 2014, the FCA should mandate it.”
