StepChange Debt Charity welcomes OFT findings on payday loan compliance
20 November, 2012
StepChange Debt Charity has welcomed today’s (November 20) findings from the Office of Fair Trading’s (OFT) interim review into compliance by payday lenders with Irresponsible Lending Guidance (ILG).
StepChange Debt Charity welcomes the OFTs findings in relation to the adequacy of affordability checks by lenders, the increasing levels of people struggling with payday loan debt and poor debt collection practices. These findings echo many of the trends seen by the charity in recent years.
The report shows that compliance levels are higher where statutory requirements are more clearly defined. The case for greater statutory control is therefore clear. In the meantime, there is now a burden of responsibility on lenders and their trade associations to ensure that industry codes are more prescriptive and, more importantly, that they are adhered to.
The charity supports the OFT’s criticisms of continuous payment authorities (CPAs). This now sends a message to firms that they should not misuse this system and it is incumbent upon them to identify how their practices will change. StepChange Debt Charity has seen numerous examples of abuse, where money has been collected without consent, leaving people without sufficient funds for rent or food.
StepChange Debt Charity welcomes the report’s findings on debt collection, as it has seen evidence of misleading and unfair enforcement practices.
StepChange Debt Charity has been concerned by the increasing numbers of its clients who have multiple payday loans. So far this year, more than 2,000 people have sought help with five or more loans, in 2009 that number stood at just 716.
Those coming to StepChange Debt Charity for help with payday loan debts owe on average £1,458, this equates to roughly the same as the average clients monthly household income, which in 2011 was £1,418.
Delroy Corinaldi, external affairs director of StepChange Debt Charity, said: “The OFT’s findings confirm much of the bad practice we are seeing from a number of payday loan providers”.
“The OFT’s report is a positive step forward in identifying industry practices that disadvantage those who are often in financial difficulty.
“In light of the OFT’s findings the government must now ensure that the OFT and Financial Conduct Authority are sufficiently powerful and appropriately funded to ensure that often vulnerable consumers are no longer the innocent victims of poor practice from elements of the payday loan industry”.