Payday lenders 'damning people into debt' says Exeter Citizens Advice Bureau

Exeter Citizens Advice Bureau, says that too many payday lenders are damning people to debt by failing to carry out adequate checks to make sure borrowers can afford to repay the loan.

Based on a survey between January and July 2013, 6 out of 10 borrowers who borrowed from a payday lender told the charity that the lender did not check whether the loan was affordable.

The survey of 57 clients with payday loans from 25 different payday lenders also found that borrowers were further let down by lenders as:

• 8 of 10 lenders did not offer to freeze interest and charges whilst the borrower tried to agree repayment terms

• 76% of customers felt pressured into extending the repayment period of the loan, with little explanation of the costs involved in extending a loan in this way

• 86% of lenders did not check personal finances to see if the customer could afford to repay the extended loan

Comments made by individuals responding to the survey include:

“It’s too easy for people to get an online loan without any references or checks made into your circumstances”

“Some lenders actively canvass for you to reloan with them, constant emails and text messages to use them again and small amounts of money taken from your account when no active loan with them”.

Over the last year, nationally, Citizens Advice has been actively lobbying for tighter financial controls on payday lenders. In February four payday lenders were reported to the Office of Fair Trading (OFT) amid calls for a ban to stop them trading immediately. Last August Citizens Advice provided evidence on the payday loan industry to the OFT investigation which saw one lender stop trading in March 2013.

The charity has been working locally to raise awareness of the practices of payday lenders.

Steve Barriball, Chief Executive of Exeter Citizens Advice Bureau said: “In partnership with Exeter Chamber of Commerce we are calling on local businesses to offer low cost loans to employees struggling with financial difficulties.”

Citizens Advice is running a payday loan tracker survey until the end of November 2013. Payday loan customers can provide their feedback online at: www.adviceguide.org.uk