Payday lenders “out of control”

The payday loan industry is "out of control", according to a charity.

Citizens Advice has claimed payday lenders are acting irresponsibly…

The payday loan industry is "out of control", according to a charity.

Citizens Advice has claimed payday lenders are acting irresponsibly when loaning money to individuals and are harassing people for payments.

It said loans were given to people under the age of 18, revealing that proper checks are not taking place. Those with mental health issues were also given money and even those under the influence of alcohol were offered a loan.

As a result, the charity has called on the regulator to ban irresponsible lenders.

The Consumer Finance Association, which represents the lenders, said it had an independent code of conduct and was also in favour of banning any rogue operators within the industry.

As banks slow their rate of lending, payday loan companies have risen in popularity, offering relatively small amounts of money with an incredibly high annual interest rate. 

Typically, people take out a payday loan to tide them over for a few days until they receive payment and the extra cash can be useful for life's emergencies such as a broken boiler. They are designed to be paid off quickly but some individuals struggle to do so and begin to spiral into debt as a result.

A report by regulator body the Office of Fair Trading revealed "widespread irresponsible lending" within the industry and gave the biggest 50 companies 12 weeks to change their practices or risk losing their licences.

It has been recommending several improvements to lenders and is now considering referring the situation to the market to the Competition Commission to study how payday loan companies compete with one another.

One method being used by lenders that is being targeted is the practice of taking money from bank accounts without any warning by using a continuous payment authority agreement.

The charity said there were even instances where too much money was taken from individuals.

Chief executive of Citizen's Advice Gillian Guy said: "The payday loan industry is out of control and is acting as a law unto itself. It has showed a complete disregard for its customers."

Payday lenders were given 12 weeks to fix their shortcomings by the Office of Fair Trading in March, however, it appears the situation is still unresolved.

By James Francis

Tell others:

shortlink

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close