Payday Loan Companies Failing To Check People Can Afford Loans
Payday lenders are failing to check that people can afford to repay the short term loans that they are giving out according to the Citizen’s Advice Bureau. The CAB claims that this is helping to push some people further into debt.
In a survey by the CAB 65 per cent of 1,270 payday loan borrowers said that they didn’t get asked about their financial circumstances during their loan application. The CAB collected the data over 4 months, and in that it said over 11,000 people contacted them looking for help and advice regarding payday loan debt.
The CAB accused the payday lending industry of not sticking to its own rules and adhering to its own industry charter. The voluntary code of conduct was launched in November 2012 and designed to make information clearer to borrowers, especially about notifications of taking recovery payments and the proper checking of the financial viability of loans to lenders.
Gillian Guy, Chief Executive of the CAB said that: ‘Payday lenders are not standing by their word to treat people fairly by checking they can actually afford the loans on offer. The knock-on effect of their irresponsible lending is devastating for families as they become consumed with debt.
‘Many find they have no money to put food on the table, pay the bills or get to work as lenders drain their bank account in a bid to claw back the debt.’
The OFT have also been investigating payday lenders. Two companies surrendered their consumer credit licences as a result of pressure from the OFT. They sent letters out to 50 lenders demanding that they overhaul their business practices to bring them into line. The firms were given 12 weeks to comply.