Citizens Advice also saw a further drop when the Government introduced the cap on payday loans on 2 January 2015.
While an initial reduction in payday loan problems is welcome Citizens Advice says it is important focus remains on the industry to ensure problems continue to decline.
Evidence from the charity had revealed some lenders were not carrying out proper checks to assess if people could afford to repay their loans and many were excessively using continuous payment authorities to drain people’s bank accounts when collecting repayments.
It also calls for other high cost credit products, such as logbook and guarantor loans, to come under similar scrutiny after the charity finds they are causing significant harm to some borrowers.
Nearly 53,000 logbook loans were taken out last year, up 44% on 2011. Issues reported to Citizens Advice include high interest rates, excessive fees and charges and aggressive behaviour when collecting debts.
A new study also found that a quarter of payday loan users could have borrowed money from their own banks instead of payday lenders.
The Citizens Advice study looked at whether there is a valid and responsible role banks can play in providing short-term credit. It found that banks were unwilling to lend to many payday loan customers because they wouldn’t have met affordability checks or due to previous credit problems including missed payments. However where lending was a viable option customers would have been able to get an arranged overdraft instead of resorting to a payday loan.
The study also highlighted how it was often the online application process and instant access to money that appealed to payday loan customers.
Citizens Advice Chief Executive Gillian Guy said:
“Irresponsible high-cost lenders are sentencing people to a life in debt. The drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on people’s lives.
“It is important to remember that it is not just payday loans that have blighted people’s finances. Other high cost lenders like guarantor or logbook loans are also causing havoc with people’s finances.
“Following concerns raised by Citizens Advice the regulator and Government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies. With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye."
