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Payday loan problems halved since cap introduced

11 June 2015

The number of problems reported to Citizens Advice about payday loans have almost halved.

Citizens Advice helped with 5,554 payday loan problems in January to March 2015, a fall of 45% on the same period in 2014.

New evidence from the national charity reveals a steady decline in payday loan problems from April 2014 as new regulations were introduced by the Financial Conduct Authority and the regulator took enforcement action against lenders.  It also shows a further drop when the Government introduced the cap on payday loans on 2 January 2015.

While an initial reduction in payday loan problems is welcome Citizens Advice says it is important focus remains on the industry to ensure problems continue to decline.  

It also calls for other high cost credit products, such as logbook and guarantor loans, to come under similar scrutiny after the charity finds they are causing significant harm to some borrowers.

Nearly 53,000 logbook loans were taken out last year, up 44 per cent on 2011.  Issues reported to Citizens Advice include high interest rates, excessive fees and charges and aggressive behaviour when collecting debts.

Borrowers can take out a guarantor loan by getting a friend or family member to act as their ‘guarantor’. This means if the borrower can’t repay the loan the guarantor has to.  Analysis from Citizens Advice suggests proper checks aren’t being carried out to assess that the guarantor has actually agreed to back the borrower or can afford the repayments if the borrower stops paying.

A new Citizens Advice study out later this month, based on interviews with major high street banks, finds a quarter of payday loan users could have borrowed money from their own banks instead of payday lenders.

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.

“Anyone looking to take out short-term credit needs to asses whether it is affordable and shop around for the best deal, including checking with their own bank.  When loans aren’t affordable debt advice can help people get their finances back on track.”

The Citizens Advice study also looks at whether there is a valid and responsible role banks can play in providing short-term credit.  It finds that banks were unwilling to lend to many payday loan customers because they wouldn’t have met affordability checks or due to previous credit problems including missed payments.  However where lending was a viable option customers would have been able to get an arranged overdraft instead of resorting to a payday loan.

The study highlights how it was often the online application process and instant access to money that appealed to payday loan customers. With arranged overdrafts offering a similar service it is important customers know that this may be an option for emergency finance. But Citizens Advice says banks need to make sure overdraft fees are fair and easily understood by customers.

Citizens Advice ran a high profile campaign calling for better protections for consumers from irresponsible payday lenders.  Evidence from the charity had revealed some lenders were not carrying out proper checks to assess if people could afford to repay their loans and many were excessively using continuous payment authorities to drain people’s bank accounts when collecting repayments.

The charity and consumer body is monitoring reports about logbook and guarantor lenders and will share its findings with regulators.

Payday loan problems reported to local Citizens Advice April 2013-March 2015

April-Jun 13






















Logbook loan case

One local Citizens Advice helped a mother with a disabled son who was left stranded on the roadside on her way to work by a logbook lender.  The tow truck driver blocked her car, reached through the window to take the keys and took the car without allowing her to remove her possessions.

Guarantor loans

One Citizens Advice client in Spalding took out a high-interest loan, with her sister as the guarantor. When the client was struggling to make payments, the lender began sending text messages to her sister’s young son asking for money.



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 get advice online or find your local bureau in England and Wales, visit
  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 2.1 million clients on 6.6 million problems from April 2012 to March 2013. For full 2012/2013 service statistics see our quarterly publication Advice trends