Citizens Advice Scotland want to hear from Scots who have been treated unfairly by payday loan companies in the last 6 months. As CAB colleagues in England and Wales today publish the findings of a survey of payday loan customers there, CAS is extending the Scottish version of the survey to allow more Scots to come forward and report their negative experiences. The survey is at http://www.surveymonkey.com/s/ScotlandPDLs .
Citizens Advice Scotland spokesperson Lucy Manson says,
“For some time now we have been very concerned about the way that many payday lenders operate. CAB advisers across the country have seen large numbers of people who are drowning in debt because of the actions of payday lenders – particularly things like high interest rates, poor background checks and harassment. 6 months ago the payday loans companies promised they would clean up their act. We have been running a survey to allow people to report whether they are sticking to that promise or not.
“Our CAB colleagues in England and Wales have today published the initial results of their part of the survey, which shows that many payday lenders have broken their commitment to the good practice charter they signed last year. They pledged then to carry out checks on the customers finances to ensure they could afford the loan, and agreed to freeze charges when customers are in financial difficulty. Stories from customers south of the border show that in many cases, lenders are falling short of keeping these promises. Unfortunately, our evidence here in Scotland shows that this echoes Scots experiences.
“But we really want to gather more information on how payday lenders are treating their Scottish customers, so that we can take action against those who are not sticking to the rules. So we urge people to come forward and complete our survey now, if they have any negative experience of payday loans.
“So anyone in Scotland who has taken out a payday loan since 26 November last year can still complete our survey to tell us how they have been treated by their loan company. The survey takes just a few minutes to complete, and the information will be treated in the strictest confidence. The CAS survey can be found at http://www.surveymonkey.com/s/ScotlandPDLs .”
For more information, interviews etc please contact Tony Hutson on 0131 550 1010 or 07774 751655.
Although it is still early in the campaign in Scotland, our casework and survey responses show that there is a lot of non-compliance to the Charter from many payday loan companies here. The following case studies show the range of issues bureaux clients and survey respondents are facing:
The ‘Continuous payment authority’ (CPA)
The CPA is the mechanism in many payday loan agreements, which allows the lender to take money from your bank account without telling you. The use of the CPA can have a serious detrimental effect on the finances of clients who are likely to be already struggling to make ends meet. The experience of CAB clients is that lenders are not giving advance notice of using this method, and in some cases have not informed customers that they even have this ability, or that the customer has the right to cancel it.
- A West of Scotland CAB reports of a client who had just discovered that £140 had been taken from her bank account by two payday loan companies. One company had been reasonable when she explained that she would be unable to feed her four children, but the other refused to deal with her on the phone and told her she would have to go online to deal with the problem. She cannot make contact this way as the email address generated an undeliverable message.
- An East of Scotland CAB reports of a client who had received £270 back from a payday lender after speaking to the collections manager. Since then the client has had £856.75 removed from her account over two days on 29/30 November using CPA. She is still not left with enough funds to last the rest of the month – she was not informed that this money would be taken from her account. The CAB made contact and again the lender has agreed to refund the client £435.75. Instead the client will put in place a direct debit of £50 a month as from January 2013.
Survey respondent explains how the use of CPAs has impacted on their lives:
"Removed money from our bank account without our permission - this money was child benefit money - that had been paid into our account. We had no money to buy food for our 2 young children and were left in a great deal of distress. When we contacted the company, the people did not care that we had no money, they were very nasty. Our elderly parents had to help us out with food for our children. The lender soon listened when we contacted Financial Ombudsman - we are still paying our remaining debt off - it has taken us ages - we only had borrowed £400. We are behind with our Mortgage and council tax and child care costs. Our elderly parents have scraped together their savings and we are slowly getting out of this mess - but it has been a nightmare for us and caused so much stress and unhappiness."
"I do want everyone to know exactly what sort of a company *** is. They've stressed me out to the point of illness and they don't have a care in the world. They just help themselves to customers’ money when they feel like it. [The company] has taken out large sums out of my account without my consent about 3 times - what was owed plus interest leaving me penniless and in despair."
Evidence from bureaux suggests that many lenders can be unsympathetic to customers who are in financial difficulties and that their practices can directly lead to a significant worsening of the customer’s situation. This includes refusing to reach a repayment agreement with the customer, failing to follow an agreed payment schedule by continuing to add charges and taking money from a customer’s account, and debt collection practices that seek to pressurise the customer into making payments.
- An East of Scotland CAB reports of a client with multiple debts who had been receiving numerous calls at all hours of the day from payday loan creditors. The creditors have been asking personal details such as when did you last get paid, when did you take money from the bank. These calls are affecting her relationship with her parents. The CAB advised the client that the calls could be classed as harassment, and that she should now keep a record of all the calls. The CAB gave the client a sample letter to send to the firm recorded delivery, or she could quote the letter when she receives the next phone call from them.
- A West of Scotland CAB reports of a client who had been making payments on an outstanding loan to a payday lender. She missed a payment one month, and was advised by MoneyMatters to cancel her debit card to ensure payment couldn’t be taken which she did. The lender is now threatening a visit to her place of work to confirm her income, and sheriff officers to come to her place of work to serve a notice of arrestment. She is a civil servant and worried she may lose her job if this happens. The CAB advised that as she took out a loan before the new code of conduct not covered, however this could constitute harassment and she can still make a complaint to the lender and OFT.
- An East of Scotland CAB reports of a client with a number of payday loans debts having taken out new loans to pay off current loans. She won’t be able to pay her forthcoming rent and council tax, nor house insurance, gas and electricity etc. Her creditors are now phoning her at work. CAB made a debt appointment for the client but also provided the client with leaflets on payday and short term loans good practice, customer charter, CAB leaflet payday loans rights and responsibilities etc. Client will tell creditors to stop payments from her bank and will get a new bank account meantime.
Collection practises as evidenced above, show that lenders can breach customer confidentiality by contacting the client’s employer or colleagues when the client misses a payment. This breaches the confidentiality of the agreement and could potentially put the client’s employment at risk.
Survey respondents explain the impact this continued harassment can have:
"Terrible experience....phoned my work (and told them who they were!). At one point, phoned every 5 mins unless I spoke with them.
Ended up calling my work (despite telling them not too) 15 times in a day! Lucky to keep my job."
"Contacted lender re. payment plan they refused. They then started sending texts and emails demanding repayment of loan. I replied via email which they say they never received (I have kept copies). Within 1month, my original loan had went from £400 to £1159.I then started receiving letters texts and emails from a recovery company stating that I had not kept up my repayment plan (never set up) and also a company claiming that they were bailiffs and would be visiting my home."
"I received numerous calls - up to 17 times a day. Also receiving numerous texts and threats that they would contact my work. [The lender] refused to speak to a support worker from the local authority, even though I was there to give my permission. Even after informing them I was receiving CAB help, the lender refused to believe this and have not replied to letters sent by CAB money adviser. Generally have received harassment from this company and felt pressured into taking out loan I could clearly not pay back. They did not take any account of my other debts or overall situation."
Lending to new and existing customers
Under the charter they signed in November 2012 lenders agreed they would act fairly, reasonably and responsibly in all their dealings with the customer. However, a number of bureau clients have been given loans that were clearly unaffordable or inappropriate for their circumstances. This has led to customers owing thousands of pounds to a string of different lenders.
- An East of Scotland CAB reports of a client who came in with her support worker – she took a payday loan out on the 8 December, total repayment is £350 due on 9 January. Client is on IS and DLA and is unable to make the repayment. She feels the terms and conditions were not fully explained, and has spoken to the lender who were hot helpful – they also have the wrong name on the agreement. The CAB gave the client details of how to complain and also to ask them to freeze interest and propose a repayment amount.
One survey respondent explains her first experience with a payday lender:
"I am a single parent on benefits and was shocked when accepted by *** for a loan. Unfortunately I did not have the money in my account on the date I was to pay back the loan, I tried on their website to set up repayment plan but couldn't then *** took every penny I had in the bank. That money was my benefits to feed my kids for two weeks. I tried emailing them to beg for some of the money back but heard nothing back from them. This has put severe hardship on me and two small children."
The responsibility of lenders to act responsibly extends to ‘rolling over’ the term of the loan. Lenders, if acting fairly, should only offer to roll over the term of the loan if the customer asks, and after the lender has reminded the customer of the risks. These practices were clearly not followed by the lenders the following survey respondents took out a loan with:
"They text and e-mail every day asking me to take out another loan. I don't want another loan but it could be so easy to get into much more debt than you realistically need to."
"I have been stuck in this for over a year now and have to keep taking out another loan each month to cover my living expenses i.e. rent, groceries ext. Basically, I have been paying £150.00 per month to keep borrowing the same amount each month and I don't know how to get out of this."
Help for customers in financial difficulties
Under the charter they signed in November 2012, lenders have agreed to help customers who are experiencing financial difficulties by freezing interest and charges, providing breathing space when accessing advice, and not proposing further borrowing in response to difficulties. The following survey respondent has a positive experience when facing financial difficulty:
"I struggled at the end to repay my loan and they were very sympathetic. They came to an arrangement with me to pay the balance and froze all interest. Once my loan was paid in full, I was advised if I needed to use the facility in the future, then I would be able too."
However, case evidence from bureaux shows a number of cases in which customers have not been dealt with sympathetically by lenders. This type of behaviour includes refusing to set up repayment plans to allow the customer to repay their debt, harassing customers through questionable debt collection practices, and offering further credit when it is clear that the customer cannot afford their current commitments.
- The Citizens Advice consumer helpline in Scotland reports of a client whose lender would not agree to a payment plan. The client has a payday loan which he realised he would not be able to repay due to financial difficulties. He contacted the lender to make them aware of his situation and to make a payment plan. The lender refused to do so and added more charges to the client’s account.
- A South of Scotland CAB reports of a client who is struggling to repay her payday loans. The adviser commented that the payday lenders were ignoring their attempts to reach an affordable agreement with the client and were continuing to add interest and charges. The client feels worthless trying to pay even small amounts as she will never dent the original debt.
- The Citizens Advice consumer helpline in Scotland reports of a client who agreed an extension on her payday loan with her lender. It was agreed that the lender would not take any more money until then. However, after the client’s tax credits were paid, the lender took £57 from the client’s account without warning.
- The Citizens Advice consumer helpline in Scotland reports of a client who tried to arrange a payment plan when he was unable to repay a payday loan. The client was told to wait until the due date had passed and then call. The client then arranged to pay £35 every two weeks. However, the lender continued to take various amounts from the client’s account without telling the client, including one payment of £160 and three payments of £10.
This lack of sympathy by lenders when a customer is facing financial difficulty is apparent in the responses of the public survey:
"I missed one month payment of my payment plan that was set up with this company, and they took the remaining balance on my next payday which left me with no money to pay my rent and nothing to feed myself for the month, I rang them and explained this, I am also pregnant and now have money to feed myself for the month or pay my rent, they didn't care and refused to let me have any of my money back, I said I would happily pay the month I owed them and clear my arrears but they didn't care. Now I will be homeless, hungry and pregnant!"
"I received a phone call from them and I offered to pay £5 a week back. He got aggressive on the phone so I hung up. I then received an answerphone message on my mobile number from him and it was in the same manner as he had spoken to me on the phone…I explained to him on the phone I am weeks away from giving birth, on low income and not getting benefits which is why I couldn’t afford to pay £88 every month to them. I was informed that they will add £2.00 a day charges, increasing the debt."