Clear action needed to address payday lending sector
28 May, 2013
Today marks the first deadline for a number of payday lenders to submit evidence to the Office of Fair Trading (OFT) demonstrating how they intend to address the various failings outlined in the compliance review into the sector. The OFT’s report found evidence of “widespread irresponsible lending and failure to comply with the standards expected of them”.
StepChange Debt Charity believes that following the introduction of the Consumer Finance Association’s (CFA) code of practice in November 2012 and the publication of the OFT’s compliance review in March 2013, there should be demonstrable evidence of improvements in the sector by the end of 2013 in the following key areas:
- Rising balances – between 2011 and 2012 the average payday loan balance of a StepChange Debt Charity client rose from £1,267 to £1,657.
- Multiple payday loans - last year 7,221 people contacting StepChange Debt Charity had five of more payday loans, up from just 716 in 2009. This indicates that lenders are not conducting suitable affordability checks and lending to those already in financial difficulty.
- Aggressive collection practices – the payday loans are the most complained about financial product by the charity’s clients, despite only 19 percent of clients having payday loans.
Delroy Corinaldi, external affairs director of StepChange Debt Charity, said: “The trade bodies and regulators have acknowledged there are serious failings in the payday lending industry, what is needed now is a clear indication of how they intend to address these problems.
“StepChange Debt Charity wants to work with the payday lending sector to ensure that financially vulnerable consumers are protected and that payday loans do not become a borrowing of last resort for those in difficulty”.