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New rules for payday lenders will help protect consumers

3 Hydref 2013

Action from the Financial Conduct Authority (FCA) to tackle payday lenders will help stem the tide of unscrupulous lenders says Citizens Advice after payday lenders failed to clean up their act.

New research from the Department for Business Innovation and Skills (also released today) echoes Citizens Advice evidence that payday lenders have not been abiding by their own customer charter.

Citizens Advice Chief Executive Gillian Guy said:

“We've long been calling for tough action to tackle payday lenders after the appalling behaviour of some lenders has driven people deep into debt and caused unnecessary hardship. The new rules from the FCA are essential to stem the tide of predatory payday lenders and protect consumers from unacceptable behaviour from the credit industry.

“All too often people are given loans without proper checks or assessments as to whether they’ll actually be able to afford to repay and others see their debts balloon as loans are rolled over.  Some people are left without money to get to work or put food on the table as lenders take payment after payment out of people’s bank accounts without any warning.

“Payday loan advertising is also a cause for concern as adverts often mask the hardship caused by payday loans so it's good to see a clamp down in this area.

“It is disappointing that despite all of their promises payday lenders have failed to treat their customers fairly.  The squeeze on living standards means people sometimes need a short-term loan to cover unexpected expenses. It’s really important that there is a responsible short-term loan market and it’s about time traditional lenders, like banks, became part of it.”  

Citizens Advice has seen a ten-fold increase in payday loans in the last four years.

Citizens Advice will continue to scrutinise the industry through its payday loan tracker and is urging people who believe they have been treated unfairly by a payday lender to make a complaint.  Payday loan customers can provide their feedback online at http://www.adviceguide.org.uk/dialogue_payday_loan_survey

In August Citizens Advice released an in depth analysis of 665 payday loan cases, reported to its consumer service between 1 January and 30 June 2013, which found that at least 76% could have grounds for an official complaint to the Financial Ombudsman including:

  • 1 in 5 were possible cases of fraud – where a person was chased for a loan they hadn’t taken out.
  • More than a third involved issues with continuous payment authorities including money that was not authorised to be taken.
  • 12% involved harassment whereby lenders pester people with phone calls and text messages rather than accept affordable repayment offers.
  • 1 in 10 were about lenders’ unfair treatment of people in financial difficulties.

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.