New study by Flintshire citizens advice highlights the perils of payday loans

A major new study into Payday Loans by Flintshire Citizens Advice Bureau (CAB) has been published this week, the study seeks to answer one simple question, are payday loans causing people of Flintshire problems?

 

It is estimated that four million people are likely to take out a payday loan in the next six months.

Alongside this increase in use, the Citizens Advice service has seen a ten-fold increase in the proportion of their clients receiving advice on debt that included a payday loan over the last four years.

There have been a number of well reported problems with irresponsible payday lending including high interest and collection charges.

CAB’s report looks at how people in Flintshire are affected through case studies, including one client who`s interest on their loan rose to 400% within a three month, and another who`s increased by 3500% within 18 months due interest charges and excessive collection charges.

The findings of the report are drawn directly from these client experiences with payday lenders, CAB also carried out a survey of those users who had obtained a payday loan.

Flintshire CAB believes that the payday lending problem could be solved with action on two fronts, greater regulation of the payday lending industry and promoting the use of affordable credit.

Key findings from the survey are:

• Only 20% of respondents who obtained a payday loan were able to repay the loan on time.
• 71% of respondents said the lender did not ask about their personal finances or perform an affordability check.
• Only 7% of respondents were asked to provide evidence of their personal finances and general situation to the lender.
• Only 27% of respondents were told that a payday loan should not be used for long term borrowing or if in financial difficulty.
• Of those who had problems repaying the loan, 91% of respondents were not told about free and independent debt counselling organisations.

Whilst there have been calls for payday lending to be banned, there is a concern this would lead to increased use of other problematic forms of lending such as loan sharks.

The Flintshire study will feed local evidence in to Citizens Advice campaigns and be used to inform and mobilise social policy work, during 2014 CAB will continue to campaign for better regulation.

You can read and down;load the full report below.

[gview file=”http://www.flintshirecab.org.uk/FCABpaydayloanreport.pdf” height=”840px” width=”610px” save=”1″]