As payday lenders face questions from MPs, the Citizen’s Advice Bureau releases new figures highlighting the damage done by unscrupulous lenders.
Gillian Guy, chief executive of the Citizen’s Advice Bureau (CAB) has today appeared before a parliamentary select committee which has also been questioning bosses of payday loan companies. She presented evidence of misconduct by some payday loan firms, and highlighted the damage done to consumers lives as a result. She said:
“Payday lenders are still failing to treat their customers fairly and check that loans are actually affordable. Citizens Advice evidence reveals 62% of loans come without proper checks to establish whether the borrower is able to repay the loan.
“It’s not just the original loan that is the problem. We’ve found that, in 7 in 10 cases, people have been put under pressure to rollover loans. Consumers also complain about being pestered with offers of more loans once their first loan has been paid off.
“All too often adverts mask the real hardship caused by irresponsible lending. Payday loans should come with a health warning containing information about the costs and the impact of taking out a loan.”
The CAB carried out an in-depth analysis of 665 payday loan customers who contacted the charity between January and June this year. They found that 32% had complaints regarding continuous payment authorities (CPAs), and that of these, 9 out of 10 could have had grounds for complaint to the Financial Ombudsman Service. They also found that 1 in 5 were already in financial difficulty or on a debt management plan, and 1 in 6 had money taken without their authorisation.
The latest evidence from the CAB's payday loan tracker found that in 20% of cases, lenders failed to make clear the full cost of the loan, and 60% didn’t establish whether the borrower could afford to pay it back.
Henry Raine, head of regulatory and legal affairs at Wonga - one of the lenders under scrutiny - said, “We aim to lend to people who can pay us back," adding: "We do everything we can to lessen the load of bad debt.”