MPs have chance to hammer home hard truths about payday loans
Payday lenders face BIS Select Committee
As payday lenders face scrutiny by MPs at the BIS Select Committee on Tuesday morning, Citizens Advice highlights the serious harm caused by unscrupulous payday lenders.
Citizens Advice Chief Executive Gillian Guy said:
“MPs have the opportunity to hammer home some hard truths from their constituencies. The payday loan industry has boomed as people struggle to cope with the rising cost of living, but it has failed to act responsibly.
“When I speak to MPs at the select committee on Tuesday I will tell them how evidence from Citizens Advice has found that people are being given loans without any proper checks to make sure they can afford to pay them back. This sends borrowers into a spiral of debt which is very hard to get out of.
“Some payday lenders are misusing continuous payment authorities by emptying their customers’ bank accounts without prior warning – leaving them without any money to get to work, pay the bills or buy food."
Citizens Advice is encouraging people to report irresponsible adverts to the Advertising Standards Authority.
Citizens Advice is running a year-long study to assess whether payday lenders are abiding by their own customer charter. The latest results, based on 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 are revealed below.
The table identifies responses to each question in the payday loan survey.
| 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.