Payday loan problems halved since cap introduced – Citizens Advice

The number of problems reported to Citizens Advice about payday loans have almost halved.

Citizens Advice helped with Five,554 payday loan problems in January to March 2015, a fall of 45% on the same period in 2014.

Fresh evidence from the national charity exposes a sustained decline in payday loan problems from April 2014 as fresh regulations were introduced by the Financial Conduct Authority and the regulator took enforcement act against lenders. It also shows a further drop when the Government introduced the cap on payday loans on Two January 2015.

While an initial reduction in payday loan problems is welcome Citizens Advice says it is significant concentrate remains on the industry to ensure problems proceed to decline.

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.

Almost 53,000 logbook loans were taken out last year, up 44 per cent on 2011. Issues reported to Citizens Advice include high interest rates, excessive fees and charges and aggressive behaviour when collecting debts.

Borrowers can take out a guarantor loan by getting a friend or family member to act as their ‘guarantor’. This means if the borrower can’t repay the loan the guarantor has to. Analysis from Citizens Advice suggests decent checks aren’t being carried out to assess that the guarantor has actually agreed to back the borrower or can afford the repayments if the borrower stops paying.

A fresh Citizens Advice probe out later this month, based on interviews with major high street banks, finds a quarter of payday loan users could have borrowed money from their own banks instead of payday lenders.

Citizens Advice Chief Executive Gillian Fellow 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 influence a strong stance against irresponsible lending can have on people’s lives.

“It is significant to recall 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.

“Anyone looking to take out short-term credit needs to cabooses whether it is affordable and shop around for the best deal, including checking with their own bank. When loans aren’t affordable debt advice can help people get their finances back on track.”

The Citizens Advice investigate also looks at whether there is a valid and responsible role banks can play in providing short-term credit. It finds 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 probe highlights how it was often the online application process and instant access to money that appealed to payday loan customers. With arranged overdrafts suggesting a similar service it is significant customers know that this may be an option for emergency finance. But Citizens Advice says banks need to make sure overdraft fees are fair and lightly understood by customers.

Citizens Advice ran a high profile campaign calling for better protections for consumers from irresponsible payday lenders. Evidence from the charity had exposed some lenders were not carrying out decent 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.

The charity and consumer bod is monitoring reports about logbook and guarantor lenders and will share its findings with regulators.

Payday loan problems reported to local Citizens Advice April 2013-March 2015

Payday loan problems halved since cap introduced – Citizens Advice

The number of problems reported to Citizens Advice about payday loans have almost halved.

Citizens Advice helped with Five,554 payday loan problems in January to March 2015, a fall of 45% on the same period in 2014.

Fresh evidence from the national charity exposes a stable decline in payday loan problems from April 2014 as fresh regulations were introduced by the Financial Conduct Authority and the regulator took enforcement activity against lenders. It also shows a further drop when the Government introduced the cap on payday loans on Two January 2015.

While an initial reduction in payday loan problems is welcome Citizens Advice says it is significant concentrate remains on the industry to ensure problems proceed to decline.

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.

Almost 53,000 logbook loans were taken out last year, up 44 per cent on 2011. Issues reported to Citizens Advice include high interest rates, excessive fees and charges and aggressive behaviour when collecting debts.

Borrowers can take out a guarantor loan by getting a friend or family member to act as their ‘guarantor’. This means if the borrower can’t repay the loan the guarantor has to. Analysis from Citizens Advice suggests decent checks aren’t being carried out to assess that the guarantor has actually agreed to back the borrower or can afford the repayments if the borrower stops paying.

A fresh Citizens Advice examine out later this month, based on interviews with major high street banks, finds a quarter of payday loan users could have borrowed money from their own banks instead of payday lenders.

Citizens Advice Chief Executive Gillian Dude 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 influence a strong stance against irresponsible lending can have on people’s lives.

“It is significant to recall 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.

“Anyone looking to take out short-term credit needs to donks whether it is affordable and shop around for the best deal, including checking with their own bank. When loans aren’t affordable debt advice can help people get their finances back on track.”

The Citizens Advice investigate also looks at whether there is a valid and responsible role banks can play in providing short-term credit. It finds 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 explore highlights how it was often the online application process and instant access to money that appealed to payday loan customers. With arranged overdrafts suggesting a similar service it is significant customers know that this may be an option for emergency finance. But Citizens Advice says banks need to make sure overdraft fees are fair and lightly understood by customers.

Citizens Advice ran a high profile campaign calling for better protections for consumers from irresponsible payday lenders. Evidence from the charity had exposed some lenders were not carrying out decent 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.

The charity and consumer assets is monitoring reports about logbook and guarantor lenders and will share its findings with regulators.

Payday loan problems reported to local Citizens Advice April 2013-March 2015

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