13 May, 2014
Following today’s announcement by the Financial Conduct Authority (FCA) that the Cheque Centre has exited the single instalment payday loan market, StepChange Debt Charity chief executive Mike O’Connor said:
“This is an encouraging sign that the short term credit market is being cleaned up. All too often payday lenders have cynically exploited vulnerable consumers and we should all support the FCA in creating a short term credit market that meets people’s needs whilst treating them fairly.”
Poor industry practice
StepChange Debt Charity has consistently highlighted a number of problems within the payday lending sector:
- Irresponsible lending and acute repayment difficulties – the average payday loan debt of a person contacting StepChange Debt Charity is £1,647, more than the average client’s monthly income of £1,381 (net). In 2013, the charity helped 66,557 people with payday loan debts, an 82 percent increase on 2012.
- Aggressive collection practices - StepChange Debt Charity has seen numerous examples of poor collection practices, including threatening and harassing telephone calls and misrepresenting legal powers.
- Debt inflation and escalation – StepChange Debt Charity continues to see numerous cases in which debts are excessively inflated through the application of interest and charges. In one case the charity helped a man whose original £200 debt grew to £1,851 in just three months
- Multiple payday loans - 13,800 people who sought the charity’s help in 2013 had 5 or more payday loans. The charity believes that real-time data sharing should be an essential part of the FCA’s strategy to fix the payday loan market.