Payday Loans Granted “To Those Under 18 And Drunken At The Time” | London Evening Standard
lenders do not act responsibly and harass people for money, a debt counseling charity warned today, with evidence suggesting operators were “out of control.”
Citizens Advice said it has seen cases in recent months including payday loans to people under the age of 18 with mental health issues or drunk when they took out the loan.
The results come at a time when Britain’s largest payday lenders face the threat of being knocked out if they fail to prove to the Office of Fair Trading (OFT) that their practices are failing. height.
The OFT is expected to announce whether it will subject the wage market to a Competition Commission investigation in June.
Citizens Advice said the OFT must take “strict and immediate action” after the commercial watchdog gave 50 payday lenders a 12-week deadline in early March to prove their good behavior or risk losing their licenses, that they need to trade.
The OFT has written to lenders in waves, telling them where to intervene, and the responses will be analyzed before deciding what to do next.
The Citizens Advice analysis comes from 780 cases reported to it between November 2012 and May of this year.
He also revealed that people were being sued for loans they had never taken out and that customers were “hounded” at their homes to shame them for paying.
The bank accounts of distressed borrowers were being drained of cash “without any warning” by lenders using a type of payment agreement called a continuous payment authorization (CPA), the charity said.
He found evidence that in some cases lenders also took more than they were owed and refused to repay.
Citizens Advice also looked at customer feedback on 2,000 payday loans from over 100 lenders, which were provided between November and May.
He said that in almost nine out of 10 cases (87%) borrowers were not asked to hand over documents proving they could afford the loan.
Three-quarters of those surveyed said they had difficulty repaying the loan, and 84% of those with repayment problems did not have the opportunity to have their interest and charges frozen.
Citizens Advice chief executive Gillian Guy called the payday lending industry “out of control” and said it had shown “total disregard” for customers.
She said: “It is vital that following the investigation, the OFT takes swift action to protect consumers from the damage caused by these unscrupulous lenders.”
Citizens Advice called on the big banks to offer people “micro-loans” as an alternative to payday lenders.
One of the areas where the charity found payday lenders improved was the explanation for the cost of the loan.
In 79% of the 2,000 customer feedback cases, lenders were much clearer about the total cost of the loan.
The OFT’s own industry investigation uncovered evidence of “pervasive irresponsible lending” and found that lenders appear to be heavily dependent on distressed customers who cannot afford to repay their loans on time.
The trade watchdog found that nearly half of lenders’ income came from loans that were rolled over or refinanced.
The OFT said it has received confirmation from 48 out of 50 lenders that they intend to prove to the regulator that they are acting within the rules.
An OFT spokesperson said: “Of the 50 payday lenders that were inspected during the compliance review, 48 confirmed that they will provide the OFT with proof that they are fully compliant, while two gave up their licenses.
“The OFT also announced that it has opened formal investigations into the practices of three payday lenders and, in addition, three payday lenders have also had their licenses revoked since the industry review in March.”
Payday lenders recently signed new codes of practice to improve affordability controls and ensure customers understand the costs involved.
Earlier this month, payday lenders urged MPs not to bracket all of their customers as “vulnerable.”
The Consumer Finance Association (CFA), which represents short-term lenders, presented a report on their clients to a gathering of MPs in Parliament, which argued that they were generally “financial smart and savvy consumers.” .
The report, titled Credit Crunched, found that more than a third (34%) of payday borrowers had incomes between £ 10,000 and £ 19,999.