Pressure for tighter regulation of payday loan firms
New findings from debt counsellors, Bradford-based Christians Against Poverty, has revealed that many of its clients use payday loans to buy food.
In a survey of 1,500 clients of the charity, four out of five (78 per cent) who took out a payday loan did so to afford food.
A large number said they used the money to pay gas or electricity bills.
And one in five people were not asked whether they had a job.
The charity’s chief executive Matt Barlow said: “This evidence shows that people taking out payday loans are not, typically, doing cosy house repairs as most payday lenders would have us believe.
“People who take out this expensive sort of credit are hungry, worried about keeping warm and becoming homeless.
“Some elements of the industry have worked hard to improve their practices – and we warmly welcome that – but these findings show irresponsible lending still looms large and those companies give the better firms a very bad name.”
More than 1,500 of CAP’s clients were asked if they had taken out a payday loan and, if so, how many.
More than half had taken out between two and five loans before they called CAP for free debt help.
A further 16 per cent admitted they had lost count of how many payday loans they had used.
Mr Barlow said: “We try hard to take a balanced view, being fair to both our clients and the credit industry.
“Therefore we shall be taking this report to individual companies and the Consumer Finance Association with the expectation that they will want to engage with us.
“We want to see regulations that insist on appropriate affordability checks including a mandatory sign-up to a credit reference company which will work in real-time, to stop people taking out multiple loans on the same day or living a payday loan lifestyle, paying one off with another.
“Thankfully there are companies who are leading the way in responsible lending and we want to see this best practice spread to the smaller names and the overseas operations who seem all too happy to operate outside of the OFT’s (The Office of Fair Trading) guidelines.”
Criticism of the short-term lenders follows a decision by five West Yorkshire councils and York Council to block access to lender websites to those using computers in libraries and council contact centres.
Staff computers at the six local authorities which together employ more than 60,000 people, will also be prevented from accessing around 200 sites offering short term loans.
A recent survey of over 100 lenders by the Citizen’s Advice Bureau found nine out of 10 applicants were not asked to provide proof that they could afford the loan.
It is estimated that around 78,000 people across the six Yorkshire authorties owe money to payday lenders who have been criticised for the high interest rates they often charge.
Christians Against Poverty, which has its headquarters in Bradford, offers debt help through a network of 233 churches.
The charity’s aim is to reduce poverty through free debt counselling.