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Payday lenders need to do more to improve practices


Just 1 in 5 people struggling to pay back a pay day loan have had their interest frozen and only a quarter of pay day loan customers feel like that are being treated sympathetically, according to the Citizens Advice Bureau (CAB).

The charities online payday loan tracker has highlighted how pay day lenders are still not working hard enough to improve their practices, despite regulations set by the FCA and pressure from inside the industry to clean up its act.

CAB have discovered that one in eight people in the UK now have a payday loan. They also found that one in five customers are not being told about the risks of extending the loan, even though the average pay day loan amount for a customer in the UK is £1000, spread across more than one loan.

This information comes after the fact that one of the biggest pay day loan companies, Wonga, have had their profits halved after a fake law firm letter sandal. The company reports a 53% drop in pre-tax profits to £39.7million for last year, and Wonga has also been attacked by MPs for charging interest rates of over 5,000%.

Gillian Guy, chief executive of Citizens Advice, said:
“Payday lenders are still not sticking to their word to treat people fairly.

“Irresponsible behavior including a lack of proper checks to see if people can afford to pay back loans and pressurising borrowers into extending loans has pushed people deep into debt. The new rules should contribute towards ridding the market of irresponsible lenders, but this won’t be achieved by regulation alone. The FCA needs to use enforcement action make sure firms flouting the rules are not allowed to operate.

“As people continue to struggle to make ends meet, the demand for short-term credit won’t go away. That’s why, as well as a cleaner market, people need more choice.”

Need financial advice?

Are you worried about a pay day loan? If you have any personal finance questions related to this news article, then please contact our financial advisers. You can get in touch by asking a question online, calling us on 0800 092 1245, or by arranging a visit.

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