Payday lenders are failing to carry out checks to make sure borrowers can afford to repay the loan, according to Citizens Advice.
It found that 65% of people did not get asked about their financial situation, leading to seven in 10 not being able to pay back the loan.
Citizens Advice is monitoring to see if the industry is sticking to the customer charter it launched on 26 November 2012 through its payday loan tracker.
The new figures are from an analysis of the first four months of findings based on feedback from customers who took out 1,270 payday loans from over 87 different payday lenders between 26 November and 31 March. Data was gathered through an online survey, questionnaires in bureaux and face to face surveys on the high street.
The figures also found that customers who weren’t asked affordability questions and had repayment problems were further let down by lenders as:
- 6 in 7 did not offer to freeze interest and charges when the borrower agreed repayments
- 71% did not explain how much it will cost to extend the loan
- 84% did not treat people sympathetically.
- During the same time period over 11,000 people sought online help from Citizens Advice about payday loans. In the last four years Citizens Advice Bureaux have seen a ten-fold increase in payday loans.
Gillian Guy, Citizens Advice chief executive, said: “Payday lenders are not standing by their word to treat people fairly by checking they can actually afford the loans on offer. The knock-on affect of their irresponsible lending is devastating for families as they become consumed with debt. Many find they have no money to put food on the table, pay the bills or get to work as lenders drain their bank account in a bid to claw back the debt.
“Payday lenders need to prove their charter is not just an empty gesture by making sure they check the loan is affordable and help those who struggle to pay back the loan.
“We also need to see banks stepping up to the plate by providing a responsible short-term credit offer so that a payday loan isn’t the only option for poor families looking for a little extra to get them by.”
