Blackpool charity warning over pay day loans checks

Some pay day lenders are still failing to carry out basic checks before giving out loans, a Blackpool charity has warned.

Monday, 5th September 2016, 9:48 am
Updated Monday, 5th September 2016, 10:51 am
Blackpool Citizens Advice Bureau team

Staff at the Citizens’ Advice Bureau (CAB) said a national survey showed more than a quarter of borrowers said they had not been asked about their financial situation before getting loans.

The charity said those who did not go through credit checks were nearly twice as likely to have trouble repaying their loan as those who did remember having checks,.

The Financial Conduct Authority (FCA) introduced a cap on payday loan interest rates and fees in January 2015.

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Since then Citizens Advice said it had helped people with 45 per cent fewer payday loan problems – from a monthly average of 2,821 issues pre-cap to 1,534 afterwards.

It also found that since October 2013 nearly 40 per cent of payday loan firms have left the market.

Despite this, the charity said that some payday lenders were flouting the FCA’s responsible lending guidance, which says firms must take “reasonable steps” to make sure customers can meet repayments without experiencing financial difficulty.

Citizens Advice helped one 33-year-old man who was granted a payday loan following checks despite suffering from depression and alcoholism, having no permanent address, being previously declared bankrupt and having only benefit income.

Tracy Hopkins, from Blackpool CAB, said: “We know many similar things are happening in Blackpool.

“Our debt advisers heard from a young mum who was not paying rent or electricity bills as she was being chased constantly for repayments on a payday loan.

“One day she received 14 text messages about paying an instalment.

“We also have a man in his 40s who was paying back a loan of £350 and his payments could be anything from £20 to £50 every week or sometimes more frequent than weekly and he had not agreed a payment schedule at all.”

The survey quizzed people taking out a loan since January 2015 and found half of these borrowers were still getting into difficulty paying back their loans.

The report also highlights new methods being used to collect payments from people’s accounts. Citizens Advice nationally found a number cases where a payday lender asked people to share their internet banking details including login, password and memorable characters so a lender could directly access their account and adjust funds without advance permission from the borrower.

It helped one woman who was asked to share her online bank details when taking out a £180 payday loan. Her lender went on to add additional loans into her account every time her balance dropped below £50, or to take a loan repayment when the account had more funds.