Payday lenders 'out of control'

Fresh evidence of "out of control" payday lenders failing to act responsibly and hounding people for money was released by a debt advice charity today.

CFA: We've got standards in place for lending

Payday lenders are not doing everything they can to make sure they lend responsibly, the Citizens Advice Bureau warned.

Russell Hamblin-Boone from the Consumer Finance Association Credit: Daybreak

Russell Hamblin-Boone from the Consumer Finance Association, which represents payday lenders said he did not believe that it was the "activities of the larger lenders" he represented.

He said: "We've got standards in place which go over and beyond what our legal requirements are to make sure that we're lending to people responsibly, that we're lending to people who can pay back and that we're making sure we are treating people fairly."

OFT: Formal investigations into lenders are open

The Office of Fair Trading said it has received confirmation from 48 out of 50 lenders that they intend to prove to the regulator that they are acting within the rules.

It comes as a charity has warned that "out of control" lenders are failing to act responsibly. An OFT spokesman said:

Of the 50 payday lenders that were inspected during the compliance review, 48 have confirmed that they will provide the OFT with proof that they are fully compliant, while two have surrendered their licences.

The OFT has also announced that it has formal investigations open into the practices of three payday lenders and, in addition, three payday lenders have also had their licences revoked since the review of the sector in March.

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Charity: Customers 'hounded' at their homes by lenders

Citizens Advice said the Office for Fait Trading (OFT) must take "tough and immediate action" on payday lenders following a 12-week deadline to prove their good behaviour.

Analysis from 780 cases reported to Citizens Advice between November 2012 and May this year found:

  • People were being chased for loans they had never taken out
  • Customers were being "hounded" at their home to shame them into paying up
  • Struggling borrowers' bank accounts were being drained of cash "without any warning" by lenders using a type of payment agreement called a continuous payment authority (CPA)
  • In some cases lenders also took more than they were owed and refused to give a refund

Charity warns of 'out of control' payday lenders

A debt advice charity has warned that "out of control" payday lenders are failing to act responsibly and are hounding people for money.

In recent months, Citizens Advice has seen lending to people who were aged under 18, people with mental health issues or people who were drunk when they took out the loan.

Citizens Advice are warning people about irresponsible payday lenders Credit: Lynne Cameron/PA Wire

It comes as Britain's biggest payday lenders are under threat of being put out of action if they fail to prove to the Office of Fair Trading (OFT) that their practices are up to scratch.

In June, the OFT is expected to announce whether it will refer the payday market for an investigation by the Competition Commission.