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More short-term credit options needed to boost competition in payday lending

9 Hydref 2014

More choice of short-term credit is key to improving competition, says Citizens Advice as the Competition and Markets Authority (CMA) publishes its provisional decision on the payday loan industry.

The CMA has to reported that consumers need a price comparisons sector to find the best deal and help drive down prices. It will also introduce transparency around late fees and lead generators.

Gillian Guy, Chief Executive of Citizens Advice, said:

“More choice will help protect borrowers from predatory payday lenders.  The demand for short-term credit is here to stay as households continue to struggle to make ends meet.  That’s why consumers need a payday loan industry that lends responsibly and treats them fairly.

“Being able to compare prices and understand the full cost, including late fees, is important.  But borrowers also need more choice.  There is an opportunity for banks to enter into the market and provide a responsible alternative to payday loans.

“The CMA is right to look at the role of lead generators. We’re concerned that credit brokers are hindering people’s ability to make informed decisions about short-term loans.  Our evidence has found that some brokers are posing as direct lenders and worse still, some payday lenders are directing people they turn down for a loan towards a credit broker.

“Anyone who is in financial difficulty already should be pointed towards debt advice rather than offered a loan.  If you are struggling with your finances you can get help from your local CAB, online at www.adviceguide.org.uk or call 03444 111 444.”

Notes to editors:

  1. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service 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 see the Citizens Advice website.
  2. 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.
  3. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
  4. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
  5. Citizens Advice Bureaux in England and Wales advised 2.3 million clients on 5.4 million problems from October 2013 to September 2014. For full 2013/2014  service statistics see our quarterly publication Advice trends
  6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.