Payday loans are increasingly becoming a significant area of advice need at citizens advice bureaux, particularly amongst younger clients who are in employment. While this form of credit may meet the needs of some customers who experience difficulties accessing mainstream credit, bureaux report that many customers have experienced financial difficulties as a result of poor policies and practices in the industry.
In response to criticism of their practices, the majority of payday lenders will follow a new Customer Charter from the 26th November 2012, which outlines their commitments towards their customers. The Charter should address some of the criticisms associated with payday lending, such as the use of Continuous Payment Authorities (CPAs) without notice and failing to deal appropriately with consumers who are in financial difficulties.
This report is part of a Citizens Advice service campaign that aims to improve the customer experience of payday loans. The report uses client evidence from citizens advice bureaux over the last year to look at the key commitments and analyse whether payday lenders are meeting them and how they can in the future. The evidence shows many cases of poor practice and policy which should not take place under the Charter. We will be monitoring the Charter's impact closely as vulnerable consumers struggle to cope with increasing money problems. This report covers the following areas:
- Lending to new and existing customers
- Extending the term of the loan
- Credit assessments
- Continuous payment authority
- Help for customers in financial difficulties
- Data protection and marketing