Payday Loans: The Good Practice Charter

The Good Practice Charter, signed up to by 90% of payday lenders, sets out a number of rules which the lenders must abide by when dealing with their customers.

In July 2012, the Government announced that the four main trade associations covering payday lenders had agreed to revise their Codes of Practice to improve practice in the payday lending industry.

The payday lenders committed to:

  • Give clear information about how a payday loan works and an example of the price for each £100 borrowed, including fees and charges.
  • Not pressurise customers to take out a loan or extend (roll over) the term of an existing loan agreement.
  • Carry out proper and appropriate affordability assessment and credit vetting to check that customers can afford the loan.
  • Set out clearly how continuous payment authority works and the customer's rights to cancel this authority, so they can decide if this type of repayment is acceptable to them.
  • Notify customers at least three days in advance of recovering payments through a continuous payment authority.
  • Freeze interest and charges if a customer is in financial difficulty and making payments under a repayment plan, or after a maximum of 60 days of non-payment.

These commitments aim to give consumers increased protection when taking out loans, and the lenders will be independently monitored to make sure they comply.

Citizens Advice Scotland is asking payday loan customers to help keep tabs on the practices of the lenders from the 26th November by completing a short survey. This will help us check that lenders are complying with the charter. We will use the data to work with trade bodies representing payday lenders and to provide evidence to the regulator, the Office of Fair Trading, where the data suggests that lenders are not complying with their regulatory guidance. 

As with all consumer products, there are rules and guidelines that must be followed to ensure fair, responsible, and transparent conduct. You can read more about the rules surrounding payday and short-term loans using the downloads below. If you need advice about any aspect of a payday loan, there is lots of information to help you solve your issue on Adviceguide: Payday Loans.

If you think you may have grounds for complaint, you can use the template complaint letter to write to the lender. This is available on Adviceguide: Complaint letter