Self-styled ‘new generation’ payday lender Cashfloat – a trading style of Western Circle Limited – has issued the results of its recent research, which reveals some stark truths about who the typical payday loan borrower is, suggests that the public’s knowledge of payday loans and their regulation remains limited, and shines some light on the practices of some of the less scrupulous lenders.
The firm’s findings include:
• Only 34% of respondents were clear as to the difference between a lender and a credit broker
• 15% were unaware of the lending caps that payday lenders are subject to, and believed that they could charge whatever they liked in interest and fees. Only 30% were aware of the specific rule prohibiting lenders from asking borrowers to repay more than the amount they have borrowed. Cashfloat suggests less reputable lenders could use consumers’ lack of knowledge in this area to their own advantage
• 71% of payday loan applicants were not in a marriage or civil partnership, possibly indicating that finances can become more stretched where there is only one breadwinner
• More than 10% of applications were from people working in the health and social care sectors, suggesting that this is a profession where employees are particularly struggling to manage their finances
• 18% of people with disabilities have resorted to payday loans and other arrangements that meet the Financial Conduct Authority’s definition of ‘high cost credit’, compared to just 5% of the non-disabled population
• 14% of respondents incorrectly believed security was required for a payday loan
• Around a quarter of people did not know what the abbreviation APR stood for (it’s Annual Percentage Rate, and allows consumers to compare the overall costs of borrowing, including all fees to be charged)
• Average debt per person in the UK rose by more than £1000 in the 12 months to September 2016. Total personal debt in the UK has now topped £1.5 trillion
• 4% of pension pots had more than 10% of their value withdrawn in 2016, suggesting that some older people are withdrawing more than they ideally should in order to address short-term financial difficulty
The firm’s news post regarding the survey comments:
“We were pleasantly surprised at how many people responded [top the survey], but when we looked at the results… well, we were shocked, to say the least. People just didn’t know the basics about payday loans. Even worse, many were people who were looking at our website and considering whether to take a loan or not didn’t know how to identify safe and responsible lenders. That got us thinking…. If the UK public don’t know the basics about payday loans, we had better do something about it.“
Cashfloat’s website says:
“Our goal is to redefine the payday loan industry with fundamentally good morals.”
The news section of its website celebrates the fact that the number of complaints about the firm made to the Financial Ombudsman Service (FOS) during the first six months of 2016 was lower than in the second half of 2015. This is despite the overall number of payday loan complaints to the FOS more than tripling over the same period. Cashfloat also had less than 40% of its complaints upheld by the FOS, compared to 53% for the sector as a whole.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.