Consumers need more choice as well as a payday loan cap
As the Financial Conduct Authority proposes to stop the overall cost of a payday loan exceeding 100% of what was borrowed, Citizens Advice highlights the need for a greater choice in short-term lending and calls on banks to offer micro loans.
Citizens Advice Chief Executive Gillian Guy said:
“Up until now, payday lenders have had the green light to send people into a spiral of unmanageable debt. High interest rates and excessive charges have made small short-term loans balloon to long term debts worth thousands.
“The cap will help limit the scale of debts but its success will depend on enforcement and is part of a raft of measures, including limiting rollovers, that the FCA must make sure lenders are sticking to.
“A payday loan cap is not the final piece of the puzzle; consumers need more choice and access to advice. Not only is the clean-up of the existing market essential banks need to step up to the plate to offer a responsible micro-loan.
“Payday loans are often used to cover the cost of daily essentials like gas and electricity bills or rent. The cap has removed some of the gamble of taking out a payday loan but it is still an expensive form of borrowing. For some people who are already struggling, instead of another loan, access to free, independent and impartial advice would help people get on top of their finances and its important lenders are pointing would-be borrowers towards this help.”
Notes to editors:
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 .
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.
To find your local bureau in England and Wales, visit citizensadvice.org.uk . You can also get advice online at adviceguide.org.uk
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
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
Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 3,000 service outlets across England and Wales.