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Payday Loans: your rights, their responsibilities

The Scottish CAB Service is urging consumers to understand their rights when taking out a short-term or 'payday' loan. Payday loans are an increasing issue for bureaux clients across Scotland, and we would like your help to monitor the lenders to ensure fair and responsible lending practices.

Payday loans are everywhere - on our high streets, in our shopping centres, and online - but how much do you really know about them?

What's the issue?

Payday loans are essentially short-term loans, so-called because they are designed to give you a little extra to tide you over till your next payday.

However, they are unsuitable for people who are unable to pay bills and debts, and who do not have enough money to live on. They have very high interest rates compared to other financial products, and can quickly get out of control if you have more than one payday loan at a time.

After concerns about problems with payday loans, most payday lenders have agreed to follow a new Good Practice Charter which sets out the rules they have to follow when selling their products. To find out more about the charter and the new rules, please see Payday Loans: The Good Practice Charter.

Citizens Advice Scotland welcomes the charter and its intention to increase consumer protection. The charter will be implemented on 26th November 2012, and in order to monitor the lenders and their adherence to their responsibilities, we need your help!

Have you been treated unfairly?

We want to know about your experience with payday loan companies from the 26th November – did they tell you how much you would have to repay? Did they check your personal finances to make sure you could pay back? If the answer is no to questions like these, they have failed to keep their side of the deal, and you have a right to make a complaint.

Please help us by filling in this short survey so we can check if the lenders have acted fairly and responsibly: Payday Loans Survey

Do you want to complain about a lender?

You can learn more about the charter and the lender's responsibilities on Adviceguide: reasons to complain. This information will help you decide if you have cause for complaint, and if you feel that you do, use our template letter to write to the lender and complain that you have been treated unfairly: letter to make a complaint about a lender.

Are you currently having problems with a payday loan or lender?

If you have current problems with payday loans and would like advice, please contact the Citizens Advice Consumer Service on 03454 04 05 06. There is also online advice on payday loans on Adviceguide: Adviceguide - Payday Loans.

If you are experiencing debt issues, there is a step by step guide on dealing with debt and getting advice and support on Adviceguide. If you need further assistance thereafter, you should contact your local bureaux to arrange an appointment. Find out where your nearest bureau is at

Continuous Payment Authorities

One of the main issues with payday lenders is their use of Continuous Payment Authorities (CPAs). Many people are confused about the rights that they have with a CPA, and this misunderstanding can cause huge financial implications for those struggling to repay a payday loan. You have the right to cancel these payments directly with your bank. We have produced more information on CPAs and what to do if you're worried about the lender taking money from your account when you do not have the funds to repay. We have produced two letters which will help you tell your bank you wish to cancel the CPA, and tell the payday loan company that you have done this.

  • Letter to bank - use this to tell your bank you want to cancel the payments the payday loan company is taking. Remember to check the guidance on timings to make sure you're not too late!
  • Letter to payday loan company - use this letter to tell the company that you have cancelled the CPA and that any further payments taken are 'unauthorised' and can be claimed back.

Cheaper alternatives to payday loans

There are cheaper alternatives to payday loans but the availability of these options will depend on your circumstances - if you have a poor credit rating and/or are in financial difficulty, we urge you to seek debt advice from your local citizens advice bureau or the Money Advice Service. They can help you manage your finances and support you towards a sustainable financial future. For many, high cost credit may be the only option for crisis situations, but there is support to help you look to the future and avoid further financial emergencies.

Financial products can be a minefield - a huge range of choices, different interest rates, and complicated terms and conditions - but Adviceguide can help consumers make informed choices about which products are most suitable for their needs. For more information about borrowing money, see Adviceguide: Borrowing Money.

Other consumer organisations like Which? campaigns to protect consumers' rights, reviews many consumer products, and offers independent advice on a huge range of consumer issues. For more advice and information on borrowing options, Which? have set up a guide to credit and loans. Finding the best ways to borrow looks at the products available to consumers, and will help you find the best credit deal for your needs.