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Help us clean up credit (and not just payday loans)

Percentage sign for interest rates

Eight in 10 of us use some form of credit. That’s around 38.5 million adults. Most of the time things go well and credit helps us to manage our finances. But what about when things go wrong or lenders misbehave?

Our research shows that around a million households take out a payday loan each month. Unfortunately, a succession of research from government and consumer groups alike shows widespread poor practice in this market.

Just last week the Department for Business, Innovation and Skills (BIS) published its new research. BIS found that more than 70% of those answering its survey said lenders did not ask them for documents to check their finances when they applied for a payday loan.

When credit is a cry for help

The BIS survey found that a vast majority of lenders did not treat customers in difficulty sympathetically (72%), did not offer to freeze interest or charges for such customers (81%) and did not tell them about free sources of advice (86%).

The new regulator, the Financial Conduct Authority (FCA), takes over the policing of consumer credit in April 2014.  It published its plans for the credit industry last week , showing the regulator is taking its new remit seriously, with proposals that will crack down on the use of rollovers, insufficient affordability assessments and the misuse of continuous payment authorities (CPAs).

It’s not just payday loans

It’s very welcome that the FCA plans to crack down on unscrupulous payday lenders. But we want it to go further and clamp down on problems faced by struggling consumers across the credit market, including sky-high penalty charges on payday loans and unauthorised overdrafts.

And it’s important we demonstrate the breadth of the issue as it can affect us in ways we may be less aware of – from people encountering problems with store cards, to shopping catalogues which force you to take out a credit agreement.

To make sure the FCA hears about the range of problems costly credit can cause, we need your help. We’re collecting evidence from consumers about their experiences of the credit industry. We’re taking this evidence to the regulator to encourage it to set tough rules for lenders and really clean up the credit market.

Share your credit story

One individual has told us he was stung with a £27 fee for a loan he was rejected from. And we’ve heard from someone who was trying to pay their loan back on time when a  technical issues on the lender’s website prevented them from doing so.

But we need more evidence.

If you’ve a story you’d like to share, and you’re happy for others to see, please share it below. If you have further details you’d like to provide, or would like to post discreetly, share your story on our campaigns website.

[UPDATE 14/10/2013] – Our latest research finds that going into your overdraft can be as costly as taking out a payday loan.

Borrowing £100 for 31 days will cost £30 with a Halifax authorised overdraft or £20 with some Santander accounts. Borrowing the same amount for the same time with a payday loan company costs between £20 and £37.

And then there are high charges and interest rates if you use an unauthorised overdraft, which you can read about in our news story. Have you ever been hit with high charges when dipping into your overdraft, whether authorised or not?


When I was moving jobs (I was working days at Tesco and moved to working nights as a CTS at Sainsbury’s) I had no income for 7 weeks. I took out a £200 payday loan with Wage Day Advance Ltd.

When it came to paying it back they tried to add on silly fees. I paid the loan back via bank transfer as I wanted to pay it back & did not trust them with my bank card. But refused to pay the fees.

Took them to the Financial Ombudsman Service and won, the FSO didn’t only agree with me, they made WDA pay me an extra £50 too.

While I do not agree with payday loans and all the stuff, they did help me out when I moved jobs and never needed one since.

I would like to see credit card companies expect full payment of balances by monthly direct debit unless a customer specifically requests the option of paying only part of the balance when they apply for a card. In the latter case the credit company should be forbidden from increasing credit limit on a card unless this is applied for.

It is far too easy for people to get into debt thanks to the ease of borrowing via a credit card and the interest rates are amazingly high, even if not in the same league as payday loans.

Whilst it is too easy for some people to get into debt, we should do more to help them manage their debt and finances – CAB seems under-resourced in this respect. Perhaps the banks could take on a charitable role in this respect to advise uneducated (financially) borrowers to both manage their budgets effectively and find the best route to getting rid of their debt. This may improve their image.
Why Payday lenders are allowed to trade at extortionate interest rates is beyond me – loan sharks are imprisoned – these are little better.

Hi all, Ed Miliband today announced that Labour would impose a levy on payday lenders if the party came into power. Labour’s aim is to raise millions of pounds through a levy on payday lenders’ profits, which it says would be used to fund low-cost alternatives like credit unions.

In response to Labour’s announcement, our executive director Richard Lloyd said:

‘Millions of people are increasingly reliant on high cost credit to pay for essentials or to repay other loans, pushing them into a vicious cycle of debt. We urgently need to see more alternatives to payday loans that give people affordable access to credit without the irresponsible practices endemic in the payday sector.’

We want to make sure that borrowers are treated fairly whatever form of credit they use. This is why we’re calling on the Financial Conduct Authority to clamp down on irresponsible lending as part of our Clean Up Credit campaign. And we need your help. Tell us about your experiences of turning to high cost credit like payday loans and overdrafts – we need as many stories as possible to make the biggest impact: http://www.which.co.uk/campaigns/money-payday-loans-overdrafts/

What direct help does this promise give to desperate borrowers? Keep the exhorbitant rates but put tax in the coffers. What they need is help and advice to manage their immediate finances and access to sensible loans. Get rid of the loan sharks.

I was pleased to read today’s announcement that the government intends to introduce legislation to impose a duty on the FCA, rather than just enable it, to regulate the pay day loans market and to control not just the interest rates but the overall costs of borrowing , including ‘arrangement fees’ and penalties. The usual resistance – “It’ll drive people into the clutches of illegal lenders”, and so on. . . . Why? It has been amply demonstrated that many loan companies have been exploiting borrowers. There’s enough margin in the business to enable lenders to make a decent return without exploitation and extortion. Maybe some applicants will get turned down because they cannot be relied upon to repay a loan; wacking them with punitive interest rates in return for an unsustainable loan is no justification. At least if all other loans are made illegal as a result of this new legislation, such a loan would be come unenforceable. That still leaves a worrying risk of threatening or menacing behaviour and possible physical violence by or on behalf of illegitimate lenders, and society has to find a way to combat that and to protect people who are vulnerable to such threats.