Affordability ‘not properly checked’ in 6 of 10 payday loans

   The recent reports about payday loan lender Wonga using made-up solicitors to threaten legal action for non-payment are only one part of the problems faced by some borrowers of firms throughout the industry.     According to Citizens Advice, many borrowers were simply not properly background-checked to determine whether they would be able toRead More

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The recent reports about payday loan lender Wonga using made-up solicitors to threaten legal action for non-payment are only one part of the problems faced by some borrowers of firms throughout the industry.

 

 

According to Citizens Advice, many borrowers were simply not properly background-checked to determine whether they would be able to repay their debt.

 

In 60% of cases where the individual later approached Citizens Advice for help tackling their debt, they had not had their affordability tested properly.

 

And the organisation is now calling for the high street banks to enter the market, in order to boost competition, ensure responsible lending, and cut the total cost of such loans.

 

Gillian Guy, chief executive of Citizens Advice, said: “In six out of ten of the payday loan cases reported to Citizens Advice, proper checks on whether people can actually pay back the loan have not been carried out.

 

“Citizens Advice has also found that some credit brokers are posing as payday lenders; this practice not only means people are being charged fees they don’t expect to pay, but it also removes a consumer’s ability to make an informed decision about who to borrow from.”

 

For those who encounter difficulty with their repayments, the general response from payday loan lenders is not one of considerable understanding.

 

Citizens Advice say 86% continued to accumulate interest on their loan, 84% were not told of the risks if they extended the term, 64% were not told of any additional costs of doing so, and 90% were allowed to extend their term with no further background checks made.

 

In a third of cases, pressure was put on the debtor to extend the loan by the lender themselves; 0nly one in ten were referred to free debt advice providers, and just one in five were treated with sympathy by their lender.

 

Source:

http://www.citizensadvice.org.uk/index/pressoffice/press_index/press_20140611.htm

 

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