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?