Wednesday, December 1 2021

Payday lenders have been accused of “irresponsible behavior” that traps people with loans they cannot afford.

A Citizens Advice study found that some companies still didn’t do basic checks to make sure borrowers could afford to repay their loans.

A survey of more than 400 people who tried to use payday loans found that one in four people did not remember, or do not remember, being asked about their financial situation or life. ability to repay a loan.

A separate study of Citizens Advice staff and volunteers showed that 27 percent said inadequate credit checks were the number one cause of problems for the people they help.

Research found that fewer problems had been reported since the introduction of a cap on payday loan interest rates in January of last year.

Citizens Advice came to the aid of a 33-year-old man who got a payday loan after suffering from depression and alcoholism, did not have a permanent address, was previously declared bankrupt and had no as benefit income.

The report finds that half of these borrowers still have difficulty repaying their loans. This increases when you consider only people who have not gone through a credit check, with 78% having experienced difficulties compared to 40% who did.

Respondents said it is easy to get a payday loan, using online apps and over the phone, and few require a credit check.

The report also highlighted new methods used to collect payments from people’s accounts. Citizens Advice has found a number of instances where a payday lender has asked people to share their internet banking information, including their username and password, so that a lender can directly access their account and adjust. funds without the borrower’s prior authorization.

Gillian Guy, CEO of Citizens Advice, said, “The irresponsible behavior of some payday lenders traps people with loans they cannot afford.

“New measures and guidelines from the Financial Conduct Authority have helped clean up the market and the number of people turning to us for help has dropped dramatically. But it is clear that some payday loan companies are flouting FCA guidelines and selling personal loans costing hundreds of pounds that they are struggling to repay.

“The time has come for the FCA to turn its guidelines into rules, requiring every payday lender to perform rigorous financial checks on potential borrowers to keep people from falling into more and more debt.”

Russell Hamblin-Boone, Managing Director of the Consumer Finance Association, which represents short-term credit companies, said: “It is unfortunate that this report does not recognize the significant changes in the regulated short-term lending industry and we do not recognize the image of the industry he paints.

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