The payday lending industry has recently been in the spotlight, with the Government highlighting that a recent survey found some lenders are still not fully complying with industry standards brought in last year. Further criticism has come from the Financial Conduct Authority (FCA), which has published its own consultation on the rulebook that the industry should be meeting from April 2014.

The results of the Department for Business, Innovation and Skills (BIS) survey showed that:

• nearly a quarter of consumers said they were put under pressure to extend their loan and approximately half of those surveyed said that lenders did not explain the risks to them of doing so,
• one in five customers reported that the lender did not ask about their finances when taking out an initial loan,
• when it came to affording a rollover, over 60% of customers said lenders didn’t appear to check their finances, and
•  there were very poor customer ratings on the use of continuous payment authority (CPA). Overall nearly one in three customers reported that CPA was not clearly explained to them and nearly 60% were not told how to cancel CPA.

The FCA is proposing to limit the number of times a high-cost short-term credit loan can be rolled over to two and introduce a limit of two unsuccessful attempts on the use of CPAs to pay off a loan.

Commenting on the findings, Citizens Advice Chief Executive Gillian Guy, described them as further evidence that payday lenders are not treating customers fairly.

“Citizens Advice’s own survey finds the industry has failed to improve since the charter was introduced last year. All too often lenders aren’t carrying out proper checks to ensure people are able to pay back the loans and are draining bank accounts without warning, leaving people with little or no money to get by,” she said.

“Firm rules for payday lenders from the FCA, and strong enforcement of them, are vital to ensure a responsible short-term loans market that works for consumers,” she added.

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