Consumers in the UK are being exploited by payday lenders who take from their bank accounts using continuous payment authorities (CPAs), according to …
Consumers in the UK are being exploited by payday lenders who take from their bank accounts using continuous payment authorities (CPAs), according to Citizens Advice.
CPAs are used by firms to collect repayments directly from someone’s account. They should not be used to take money or change the amount without warning but a creditor does have flexibility over when and how much money they can take.
The national charity has seen evidence of money being taken without permission or warning and sometimes they have done so even after loans have been paid off.
Indeed, the new figures reveal one in three (32 per cent) complaints about payday loans made to the Citizens Advice consumer service were because of these CPAs. Some nine in ten customers who expressed concern about the payment method could have grounds for an official complaint about unfair treatment, according to the organisation.
One-sixth of people had money taken from their current account without any authorisation, while a similar number confirmed the lender had used a CPA to take more money than they had originally agreed.
There were even some cases when bank accounts were completely drained, which leaves people forced to borrow more to cover basic daily living costs like food or rent. This means they often face high overdraft fees and late payment charges if there is not enough money to cover all payments.
Debt is also still a big issue for consumers, with one in five in financial difficulty or in a debt management plan.
Citizens Advice chief executive Gillian Guy said: "People can feel powerless when unscrupulous payday lenders use CPAs to run amok in their bank accounts. Now, we’re reminding consumers that they can fight back.
“Misuse of CPAs can leave people without money to eat, pay rent or get to work, and can force people further into debt to stay afloat."
The organisation also wants to see a sector-specific code for payday loans adverts, such as the ones imposed on gambling.
By Joe White