Payday loans 'more expensive'

She borrowed almost 200 pounds but is now facing a bill of more than two thousand - from a payday loan company. It means Steve Doran's plans to get married and buy a house are now impossible.

Today, the Goverment announced the biggest investigation into the industry - as demanded by many MPs. Pay day loan companies are notorious for massive interest charges.

Our report is from Charlotte Wilkins.

Geoff Brown, of Hampshire Credit Union, says the Office of Fair Trading guidelines make it clear there is "an overarching principle of fairness in dealing with people".

He says, based on the OFT's report, payday lenders are not following this advice and "need to".

A woman from Kent who borrowed £170 to help a friend from a payday lender has welcomed the announcement that the Office of Fair Trading is to refer the company to the competition commission.

Steve Doran told ITV News it took her more than 18 months to pay off the loan.

"I know people who've struggled on for years" she said. "I suppose I was lucky that I could always make the repayment but even myself I've paid some £2,000 in interest".

"There are people who when you miss a payment it just goes up and up and up. I seems to me to be a very harsh sentence for one bad decision made out of love".

Read: Payday lenders rapidly grow in South East

The Office of Fair Trading (OFT) said it decided to refer payday lenders for a full investigation by the Competition Commission because it continues to suspect that features of the market "prevent, restrict or distort competition".

The "fundamental" problems the trading watchdog has found, such as loans becoming far more expensive than struggling borrowers had expected, cannot be tackled by existing laws and guidance, it said.

The Office of Fair Trading (OFT) decision is the culmination of a large-scale investigation into the £2 billion payday sector, including spot checks on household names such as Wonga.

Debt charities have accused lenders of being "out of control", by granting loans to people who cannot afford to repay them:

• More than 7,000 people who contacted debt charity StepChange last year had five or more payday loans - rocketing from just over 700 in 2009
• Charities have also reported seeing cases where people were drunk when they took out the loan or had mental health issues

• They have raised concerns that penalty fees and charges piled on top of interest can also mean that the cost of the debt balloons out of proportion with the original loan for a struggling borrower

• In one case seen by StepChange, a client faced a total debt of £1,830 for an initial loan of £120