7 in 10 put under pressure to rollover loans
Citizens Advice evidence on payday loan problems
Citizens Advice Chief Executive, Gillian Guy, revealed the detrimental impact unscrupulous payday lenders have had on people’s lives at the BIS Select Committee on payday loans this morning.
Citizens Advice Chief Executive, Gillian Guy, 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.
“At the BIS committee today lenders revealed they can refund money to consumers who have been left in financial difficulty after a repayment by a continuous payment authority. Customers need to know this is a real option instead of being left to drown in debt.
“The new rules planned by the FCA will help to protect consumers from predatory payday lenders. It’s essential the proposals make it into the rule book and are adhered to.”
Citizens Advice is calling on people to ‘get mad about the ad’ by reporting irresponsible adverts to the Advertising Standards Authority.
An in depth analysis of 665 payday loan customers who contacted the charity’s consumer service between January and June 2013 found that 32% (201 people) had complaints about CPAs. Of these:
- 9 in 10 could have grounds for a complaint to the Financial Ombudsman Service.
- 1 in 5 were already in financial difficulty or on a debt management plan.
- 1 in 6 had money taken without their authorisation.
- 1 in 6 said that the payday lender used a CPA to take more money than they had originally agreed.
Latest findings from Citizens Advice payday loan tracker are below. This is from customer feedback on over 3,000 payday loans from over 100 different payday lenders which was provided by between 26 November and end of August.
|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||20%|
|Explain how the loan will be repaid||16%|
|Establish if the borrower can afford to pay back the loan||62%|
|Ask the borrower to provide documents to prove they can afford to repay the loan||87%|
|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||80%|
|Make it easy to contact them if the borrower is struggling to repay||54%|
|When people are having difficulty repaying, treat them sympathetically||82%|
|Freeze interest and charges for people struggling to repay loans||83%|
|Tell borrowers that free debt advice is available from charities||91%|
|Don’t put pressure on borrowers to extend loans||71%|
|Highlight the risks of extending a loan||82%|
|Explain costs of extending a loan||63%|
|Check borrowers could afford to pay back the loan if it was extended||94%|
Notes to editors:
- The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
- The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
- To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
- You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
- Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014 service statistics see our quarterly publication Advice trends
- Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.