New evidence from the national charity’s online payday loan tracker survey highlights how payday lenders have been slow to improve their practices, despite the industry’s own promises and pressure to clean up its act.
Just 1 in 5 people struggling to repay their loan had the interest frozen and only a quarter thought the lender treated them sympathetically.
Citizens Advice has found that some payday lenders do seem to be making slight improvements when it comes to asking people about their personal finances. Half of customers are now reporting that this the case, compared to a third previously.
New, separate analysis of Citizens Advice clients with serious debt problems finds that 1 in 8 has a payday loan and that £1,000 is the average payday loan debt (this is often spread across a number of loans).
Wednesday 1 October marks the end of the ‘grace’ period given to payday lenders and other providers of consumer credit, allowing them time to adapt to the new regulations brought in by the Financial Conduct Authority in April this year. Some lenders have already felt the force of the FCA with companies ceasing trading due to the new rules coming in and early action from the FCA.
Gillian Guy, Chief Executive of Citizens Advice, said:
“Payday lenders are still not sticking to their word to treat people fairly. While things are moving in the right direction, some payday lenders are still falling far short of responsible lending. Customers need to have the full facts at their finger-tips when making decisions about borrowing.
“Irresponsible behaviour including a lack of proper checks to see if people can afford to pay back loans and pressurising borrowers into extending loans has pushed people deep into debt. The new rules should contribute towards ridding the market of irresponsible lenders, but this won’t be achieved by regulation alone. The FCA needs to use enforcement action make sure firms flouting the rules are not allowed to operate.
“As people continue to struggle to make ends meet, the demand for short-term credit won’t go away. That’s why, as well as a cleaner market, people need more choice. Increasing the number of credit unions is part of that, but so too is banks stepping up to the plate by offering a responsible micro-loan.”
