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Wonga not only firm ‘guilty’ of lack of checks for loans

2 Hydref 2014

Not checking if people can afford loans is a widespread problem in the payday loan industry, says Citizens Advice. Today, Wonga has been ordered to write-off the loans of 330,000 people because they did not properly establish if they could repay.

Gillian Guy, Chief Executive of Citizens Advice, said:

“A lack of checks by lenders is setting a debt trap for borrowers.  People are left struggling to make ends meet as high interest rates and charges quickly ramp up debts. The FCA is right to come down hard on Wonga after it found it had poor affordability processes but it is not only lender guilty of this; it is a widespread problem within the industry.

“Citizens Advice has found that in half of payday loans cases reported to us, lenders didn’t ask about people’s personal finances.  Checking whether someone can actually afford to repay a loan should be at the heart of any credit process.  The action by the FCA today should be the start of things to come to clean up the payday loan market and lenders changing their practices.”

New evidence from Citizens Advice released earlier this week found Just 1 in 5 people struggling to repay a payday loan had the interest frozen and only a quarter thought the lender treated them sympathetically.

Separate analysis of Citizens Advice clients with serious debt problems finds:

  • 1 in 8 has a payday loan.
  • £1,000 is the average payday loan debt (this is often spread across a number of loans).
  • Clients with payday loans debts are more likely to be employed.

Notes to editors:

  1. 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.
  2. 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.
  3. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
  4. 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
  5. 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
  6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.