WIREDGOV

Payday lenders should seize the opportunity to point people they have turned down for a loan towards debt advice says Citizens Advice.  

New research from the Consumer Finance Association, which represents payday lenders, says that some people say they were left financially worse off after being turned down for a payday loan.  Citizens Advice has warned that encouraging borrowers to take out unaffordable loans is not a solution to financial problems.

Gillian Guy, Chief Executive of national charity Citizens Advice, said:

“People should not be given payday loans they have no chance of repaying.  Anyone who is turned down for a payday loan should be pointed towards free, impartial debt advice to help them address their money problems.  Borrowers were only told about debt advice in just one in five payday loan cases people reported to us.

“It’s important the new rules introduced by the FCA clean up the payday loan market.  The regulator needs to make sure that people aren’t being treated unfairly by lenders and are only allowed to borrow what they can afford to repay.

“As people continue struggling to make ends meet, the demand for short term credit will remain high.  People need more choice when it comes to short-term credit.  Increasing the number of credit unions will provide an alternative but so too will banks offering a responsible micro-loan.”

Between April and August this year, Citizens Advice’s payday loans tracker found that:

•19% of people were told how to get free debt advice

•26% were treated sympathetically by their payday lender if they ran into difficulty

•22% were made aware of the risks of extending a loan

•Half were asked questions about their finances before being given a loan.

Last week, Citizens Advice revealed that young people who are struggling to make ends meet are more likely to turn to risky credit options like a payday lender, than other types of credit.  Analysis of 30,000 of the most serious debt cases experienced by Citizens Advice clients showed that ten per cent were aged 17-25. But 15 per cent of problems caused by high cost credit were in this age group. Payday loans accounted for 62 per cent of high cost borrowing among people in this age group.

Citizens Advice

Notes to editors:

1. This year the Citizens Advice service celebrates its 75th anniversary. We’ve planned a year of activity running from January to December 2014. Contact the press office on 03000 231 080, or via email at press.office@citizensadvice.org.uk, to find out more.
2. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
3. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
4. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
5. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
6. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.6 million problems from April 2012 to March 2013. For full 2012/2013 service statistics see our quarterly publication Advice trends
7. Citizens Advice service staff are supported by more than 22,000 trained volunteers, working at over 3,000 service outlets across England and Wales.