National advice charity Citizens Advice (CitA) has reported a significant fall in the numbers of people contacting it with issues regarding payday lending.
CitA helped with 5,554 payday loan problems in the first quarter of 2015, a 45% reduction from the figure of 10,155 in the equivalent period in 2014. The first quarter of 2014 saw payday loan related queries to the organisation reach their peak.
CitA believes that the reduction is due to the introduction of additional regulation by the Financial Conduct Authority (FCA) in April 2014, the enforcement action the FCA took against some lenders and the introduction of the price cap in January 2015. It welcomes the reduction, but calls on the regulator to continue to subject the payday loan sector to a high level of scrutiny.
CitA also urges the FCA to make monitoring of logbook and guarantor loan firms a priority, as it has evidence that the business practices of these firms are harming borrowers.
It says that many logbook loan customers report that they are being charged high interest rates and fees; and speaks of aggressive attempts being made to collect monies owed. It reports the case of one customer who had her car re-possessed at the roadside, leaving her stranded and unable to retrieve her personal possessions from the car.
Guarantor loan firms are said by CitA to be failing to carry out sufficient affordability checks on the guarantor, or to make clear to the guarantor the extent of their obligations. One firm is also said to have sent text messages to a guarantor’s young child asking for payment.
In its press release on the subject, CitA also revealed one statistic from a report it will publish later in June. It says that one quarter of payday loan customers would have been able to borrow from their bank (via an overdraft) had they approached them instead. The study will also reveal that payday loan customers are attracted by the ability to apply online and by the speed with which funds are provided.
CitA has campaigned on the issue of payday loans for some time, and has previously reported on lenders conducting inadequate affordability checks, and on inappropriate use of Continuous Payment Authority.
Citizens Advice Chief Executive Gillian Guy said:
“Irresponsible high-cost lenders are sentencing people to a life in debt. The drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on people’s lives.
“It is important to remember that it is not just payday loans that have blighted people’s finances. Other high cost lenders like guarantor or logbook loans are also causing havoc with people’s finances.
“Following concerns raised by Citizens Advice the regulator and Government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies. With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye.”
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