Citizens Advice’s evidence reveals that payday lenders are harming consumers with widespread irresponsible lending and debt collection practices. The national charity welcomes news that the Financial Conduct Authority will investigate the industry’s debt collection practices.
Gillian Guy, Chief Executive of national charity Citizens Advice, said:
“This is a clear signal that payday lenders’ wilful ignorance of their customers’ financial difficulties won’t be tolerated. The FCA is right to ramp up pressure on lenders who exploit people’s money problems and must turn this into tough consequences where they find instances of unfair and bulling debt collection.
“Lenders’ failure to check a customer’s ability to pay back money traps people in a cycle of debt and leaves borrowers struggling with loan repayments they can’t afford to pay off.
“We help clients who have been harassed at home and at work by lenders or who are struggling with unmanageable repayments despite attempts to sort out their debts. Some people have found themselves without money to get to work or put food on the table after a payday lender used a Continuous Payment Authority to drain their bank accounts out of the blue.
“Launching the review on the first day that they take over new powers shows that the FCA shares our concerns over the risk these practices pose to consumers, and we will be working with them to share our evidence and make sure that consumers are protected.”
Citizens Advice’s payday loan tracker reveals widespread irresponsible practice from the payday loan industry.
Results from the first twelve months of the survey shows that 83% of people said that lenders didn’t treat them sympathetically or offer support when they ran into difficulty, 84% failed to freeze interest payments and only 9% said lenders told them where they could get free debt help.
The first twelve month findings from Citizens Advice payday loan tracker are below. This is from customer feedback on over 4,000 payday loans from over 100 different payday lenders which was provided between 26 November 2012 and 18 November 2013.
Citizens Advice survey questions to gather evidence on compliance to the code Loans that did not comply
To make clear how much a loan will cost in total 21%
Explain how the loan will be repaid 17%
Establish if the borrower can afford to pay back the loan 61%
Ask the borrower to provide documents to prove they can afford to repay the loan 88%
Warn that a payday loan should not be used for long-term borrowing or to deal with money troubles 57%
Explain how to make a complaint 81%
Make it easy to contact them if the borrower is struggling to repay 54%
When people are having difficulty repaying, treat them sympathetically 83%
Freeze interest and charges for people struggling to repay loans 84%
Tell borrowers that free debt advice is available from charities 91%
Don’t put pressure on borrowers to extend loans 70%
Highlight the risks of extending a loan 82%
Explain costs of extending a loan 64%
Check borrowers could afford to pay back the loan if it was extended 94%