Debt charity is swamped with payday loan callers

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Debt charity is swamped with payday loan callers

This is a duplicate of the Blog Entry made on 27th February 2013 10:01.

*The number calling up with problems nearly doubled to 20,000 last year with some borrowers holding 80 payday loans * National Debtline took...

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[The Tech Clerk]

Re: Debt charity is swamped with payday loan callers

Time to make a clean sweep and outlaw Payday lenders as they are worse than back street bully boys and their interest rates are criminal, the bank must be behind this

[SaltnVinegar]

Re: Debt charity is swamped with payday loan callers

Time to make a clean sweep and outlaw Payday lenders as they are worse than back street bully boys and their interest rates are criminal, the bank must be behind this

This may surprise you (with my hatred of the them!) but I don't necessarily agree that outlawing the payday loan industry is the right thing to do.

I think that if someone makes a responsible choice that they can afford to take a loan at 3,000% APR, and pay it back 10 days later, then I don't see a problem with that.

HOWEVER.............................

There are many other points that need to be addressed as current consumer credit legislation just is not adequate to address the way payday lenders operate.

First of all you will notice that I referred to someone making a 'responsible choice' in taking a loan.

Simple fact is many payday lenders are not giving loans to people making a responsible choice and can be accused of not following the guidelines given on responsible lending. In fact, many payday lenders make a big deal about the fact that they do not carry out credit checks on applicants.

So what happens is that some people see payday loans as a way out of a difficult financial situation rather than tackling the reasons as to why they are there in the first place. Consequently the payday loan compounds the financial situation.

I frequently see payday lenders advertising on television breaching advertising standard agency regulations. I frequently complain to the ASA about these adverts, and several I have complained about have either had their adverts pulled, or had to alter them. The most typical issue is not showing the APR.

This however, does not stop them from the dodgy internet advertising and email spamming that they subject people to.

I have also seen advertising from payday lenders targeting specific demographic groups that could only be called financially vulnerable (students and pensioners for example). Not exactly responsible lending that is it?

Many payday lenders websites are also not compliant with MoJ requirements nor OFT requirements when it comes to company information they should display, consumer credit license information.

Some payday lenders websites show CCL numbers, which relate to a completely different company (not a parent company) which in itself is unlawful............

Once they hook a customer, then there is the practice of encouraging customers to 'roll over' the loans. Now many lenders state they do not do this, however I have sufficient evidence in the form of emails to customers encouraging them to do so (e.g. "Your payment date is fast approaching and you have options available to you") which would demonstrate that encouraging customers to 'roll over' their loans is endemic across the whole industry.

If customers pay back the loan on time, then they are subsequently inundated with 'special offers' to encourage them to take out further loans. More worryingly customers are often told that they can borrow even more money with consequent higher repayments which further compounds the 'roll over' situation.

If customer do not pay back the loan, or are unable to pay back the loan, then they are subject to some of the most awful, aggressive, and, in some cases, unlawful debt recovery practices I have seen. As far as adherence to OFT guidelines (or even CSA guidelines of which many of these companies are members) it is non existent.

This is just a small sample of the 'conduct' of these companies. Simply, as far as payday lenders are concerned, its the wild west out there and they are getting away with this behaviour because current legislation simply did not consider this sort of 'product'.

I frequently use this example - as borrowers typically obtain their loans through an online website, then distance selling regulations should apply. How does this work with a payday loan?!

So I consider that legislation around consumer credit needs to be reviewed with the explosion of these 'products' to protect consumers, and the existing legislation enforced more vigorously when it is broken.

To answer the question on whether the banks are behind payday loan companies - yes they are. I have evidence of the investment arm of Barclays funding one well know payday lender as an example.

In consideration of all of the above it is not a surprise that debt charities are seeing an increase in people having problems with them.

HOWEVER........

I will also revise my first comment where I said I do not have a problem with someone making a responsible decision taking on a 3,000% APR loan if they can afford to pay it back.

I don't have a problem with this if they made this decision on a level playing field.

But they cannot because if they do make that decision, pay back the loan, demonstrating that they can afford to pay it back, the fact they took the loan in the first place is then frowned upon by mainstream lenders (whose refusal to provide credit in the first place probably led to someone looking at a PDL in the first place).

So its not a level playing field as you could have a perfect payment history in your CRA file, but if you take out a PDL this would score against you if you tried to get a mortgage for example.

What I am seeing is almost a 'two tier' credit society being formed where many people are being shut out by mainstream lenders, who are then forced to take expensive credit (being financed by the mainstream lenders), which then further prevents them from getting credit with mainstream lenders at all.

Its this that needs looking at as much as anything else.

You may notice I could go on for hours

Best
SnV

[pompeyfaith]

Re: Debt charity is swamped with payday loan callers

You could go on for hours SnV because I enjoyed reading it and we all need to wise up to the practices of this sector.

[SaltnVinegar]

Re: Debt charity is swamped with payday loan callers

You could go on for hours SnV because I enjoyed reading it and we all need to wise up to the practices of this sector.

Thanks PF

Well here is another example:

University bans payday loan companies - allaboutFORUMS

Now what is shocking is that payday loan lenders were ever allowed to advertise on a student campus, or in student magazines in the first place.

How this could ever be considered 'responsible' is beyond me.

What the payday lenders know is that these 'customers' will be short on life experience, therefore they know that they will be able to bully and intimidate them into paying up when the inevitable happens.

The fact that these loans could be an indirect cause of crime and prostitution of such young people is damning, no matter how the 'industry' tries to position itself.

Best
SnV