Since the introduction of new FCA regulations in April 2014, the number of complaints the Citizens Advice have received regarding payday loans has nearly halved.
There was also been a further drop in the number of complaints when the government introduced a cap on payday loan interest in January.
The charity has previously revealed that some lenders were not carrying out proper checks to assess if borrowers were in a position to pay the loan back. Many were also using continuous payment authorities to drain debtor’s bank accounts leaving them with little left for other living costs.
Citizens Advice has also called for scrutiny to other high interest lending products such as logbook loans and guarantor loans after it was found that these types of loans are causing significant harm to some users.
Almost 53,000 logbook loans were taken out last year, a 44% increase from 2011. Citizens Advice has revealed the issues reported to them include high interest, fees and aggressive debt collection tactics.
A recent Citizens Advice study looked if there was a role banks could play in the short term lending market. The study found that a quarter of payday loan users could have borrowed money from their own banks. However, many others would not have met the stringent criteria set by banks. Major Banks also don’t provide online applications and instant access for small loans, something that lenders have responded well to.
Gillian Guy, Chief Executive of Citizens Advice said: “Irresponsible high-cost lenders are sentencing people to a life in debt. The drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on people’s lives.
“It is important to remember that it is not just payday loans that have blighted people’s finances. Other high cost lenders like guarantor or logbook loans are also causing havoc with people’s finances.
“Following concerns raised by Citizens Advice the regulator and Government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies. With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye.”
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