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CAB - Payday lenders need to deliver on promise to check loans are affordable

Research from Citizens Advice has found that 65% of people who take out a payday loan do not get asked questions to establish if they can afford to pay back the loan, as the Consumer Finance Association admits affordability checks are critical.

Citizens Advice Chief Executive Gillian Guy said:

“Payday lenders are sending people into a spiral of debt. Sixty-five percent of loans don’t come with checks to establish if borrowers can actually afford to repay them. This flies in the face of the lenders’ promise to make sure loans are affordable. Lenders need to stick to their word by actually asking people about their financial circumstances to stop them drowning in debt.

“For more and more squeezed households payday loans are a necessary way to get by on a tight budget. It is absolutely essential that there is more choice in the short-term credit market so people don’t have to resort to unscrupulous payday lenders. We want banks to offer a responsible version of a payday loan to address this gap.”

Notes to editors

  1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, 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 information in England and Wales see www.citizensadvice.org.uk
  2. 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. For online advice and information see www.adviceguide.org.uk
  3. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.9 million problems from April 2011 to March 2012. For full 2011/2012 service statistics see our quarterly publication Advice trends
  4. Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable (nfpSynergy’s Brand Attributes survey, May 2010).
  5. Most Citizens Advice service staff are trained volunteers, working at around 3,500 service outlets across England and Wales.