Debt problems with payday loans more than doubles in one year

Citizens Advice launches national survey to hold payday lenders to account

As the new payday lending customer charter is launched, Citizens Advice Bureaux across the country are today releasing new figures demonstrating a worrying increase in the number of serious debt cases relating to payday loans.

The Citizens Advice service has seen a ten-fold increase in the proportion of clients receiving casework help with multiple debts which included a payday loan debt in the last four years. In the first quarter of 2009/10 only one per cent of CAB debt casework clients had at least one payday loan and in the same quarter last year this had risen to four per cent. In the same quarter this year, 10 per cent had at least one payday loan.

Advice given by bureaux includes which debts to prioritise, a client’s right to stop payday lenders taking money straight out of their bank account and negotiating a manageable repayment plan with the lender on a client’s behalf.

Citizens Advice is calling on people who have taken out pay day loans to take part in a national survey to monitor whether payday lenders are sticking to their self-regulating charter.  The year-long survey will ask payday loan customers questions including:

• Q: Did the lender ask you to provide documents about your personal finances and general situation to check that you could afford to pay back the loan?
• Q: Did the lender tell you that a payday loan should not be used for long term borrowing or if you are in financial difficulty?
• Q: Did the lender offer to freeze interest and charges for you if you make payments under a reasonable repayment plan?

The survey will run on the Citizens Advice Adviceguide website at:

• adviceguide.org.uk/dialogue_payday_loan_survey

Participants will also be able to fill in template letters to inform the payday loan company of their situation and experience of taking out a payday loan. Citizens Advice will report initial findings from the survey in spring 2013.

Chief Executive of Citizens Advice, Gillian Guy said:

“Quick cash payouts can have damaging long-term consequences. Citizens Advice Bureaux up and down the country are seeing people who are already in long-term financial difficulty and are using payday loans as a desperate way to try to stay afloat. With the added costs of Christmas around the corner we're worried that even more people may see payday loans as away to get by, leading them intoa spiral of debt.

“Citizens Advice is calling on people to name and shame payday loan companies who aren't acting fairly.

"Anyone struggling to keep on top of their finances can get free, independent and impartial advice from their local Citizens Advice Bureaux or online at www.adviceguide.org.uk."

Notes to editors

1. The Good Practice Customer Charter on Payday and Short-term Loans is for customers who have or who are considering applying for a payday or short-term loan with a lender who is a member of the Consumer Finance Association, the Consumer Credit Trade Association, the BCCA, or the Finance & Leasing Association.
   
   
2. Multiple debt casework is the most severe debt problems that bureaux see. It represents around 35 per cent of all of the debt problems that bureaux deal with.
   
   CAB advisers have access to a bespoke debt advice case recording tool that is linked to the main CAB service client record database.
   
   This analysis is a sample of 35,182 CAB multiple debt clients from Q1 2012-13 (April, May June 2012), 27,430 from Q1 2011-12 and 24,186 from Q1 2009-10. The three samples are compared to get a snapshot of the growth of payday loan debts among CAB debt clients over the period.
   
   The latest analysis of serious debt casework involving payday loans carried out by Citizens Advice shows that it has risen as a percentage of total debt casework since 2009:
   
   
   
   
3. The Citizens Advice payday lender survey asks the following questions:
   
   
   • Who have you taken your payday loan with?
   • What amount have you borrowed?
   • How did you apply for the loan?
   • Did the lender make it clear how much it would cost you in total to repay the loan?
   • Did the lender make it clear how you would repay your loan?
   • Did the lender ask you questions about your personal finances and general situation to check that you could afford to pay back the loan?
   • Did the lender ask you to provide documents about your personal finances and general situation to check that you could afford to pay back the loan?
   • Did the lender tell you that a payday loan should not be used for long term borrowing or if you are in financial difficulty?
   • Did the lender tell you what to do if you had a complaint?
   • Was it easy to contact the lender?
   • Did the lender deal with you sympathetically and positively?
   • Did the lender offer to freeze interest and charges for you if you make payments under a reasonable repayment plan?
   • Did the lender let you make the decisionto extend the loan without pressurising you?
   • Did the lender tell you about the risks of extending the loan?
   • Did the lender make it clear how much it would cost you to extend the loan?
   • Did the lender check your personal finances and general situation to see if they were able to pay back an extended loan?
     
     
4. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see www.citizensadvice.org.uk
   
   
5. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality. For online advice and information see www.adviceguide.org.uk
   
   
6. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.9 million problems from April 2011 to March 2012. For full 2011/2012 service statistics see: www.citizensadvice.org.uk/press_statistics
   
   
7. Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable. (nfpSynergy’s Brand Attributes survey, May 2010).
   
   
8. Most Citizens Advice service staff are trained volunteers, working at around 3,500 service outlets across England and Wales.