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Focus on speed sees payday loans given out without proper checks

27 Mehefin 2013

Payday lenders’ focus on the speed of credit has led to loans being given without checks to make sure the borrower can afford to repay, says Citizens Advice, as OFT announces the payday loan industry will be referred to the Competition Commission.

Citizens Advice Chief Executive Gillian Guy said:

“Payday lenders are recklessly quick to hand out loans meaning proper checks fall by the wayside.  Lenders should not be competing on how quickly they can get cash into a borrower’s bank account.  Instead the focus should be on the cost of credit and how they treat their customers. It is good that the OFT, has decided to refer the payday loan market to the Competition Commission.

“Citizens Advice evidence found that in 64% of cases loans come without any checks to make sure the borrower can afford to repay, revealing that lenders aren’t taking the time to establish whether a payday loan is suitable for the customer.

“Payday loans are quick to take out but often aren’t as easy to pay back, often leading to serious financial troubles. Debts quickly spiral out of control as those struggling to repay are hit with high interest rates and charges. The industry is in desperate need of a transformation from predatory firms to a responsible short-term credit market.”

Notes to editors

  1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, 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 information in England and Wales see www.citizensadvice.org.uk
  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. For online advice and information see www.adviceguide.org.uk
  3. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.9 million problems from April 2011 to March 2012. For full 2011/2012 service statistics see our quarterly publication Advice trends
  4. Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable (nfpSynergy’s Brand Attributes survey, May 2010).
  5. Most Citizens Advice service staff are trained volunteers, working at around 3,500 service outlets across England and Wales.