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OFT's payday loans review welcomed by CAS

Citizens Advice Scotland have backed the Office of Fair Trading (OFT) review of payday loans, and have urged people meanwhile to avoid the ‘misery’ of high-interest loans.

CAS Head of Policy Susan McPhee says,

“Debt is one of the most common issues brought to the Scottish CAB service, and we’re certainly seeing a steady growth in the numbers of cases which are related to payday loans.

“These loans are very well advertised and are designed to appeal directly to those who are struggling to make ends meet. Yet their interest rates are often extremely high, and many of the clients we see feel the terms were not presented accurately or clearly enough.

“So we very much welcome the OFT’s review and we will be co-operating fully with it. In the meantime we would urge everyone who is tempted by any form of loan offer to stop and think carefully before signing anything. We understand that the slick, friendly TV adverts are very appealing. But there is no such thing as free money – you will have to repay it, with interest. In some cases, a lot of interest.

“If you really need to borrow, don’t just go for the first offer you see, or the one that has the best adverts. There are a number of lending options available - some of them are much more manage-able than others. Before taking out any loan, you should make sure you know exactly what the interest rate is, how much you will have to pay back, what the penalties are for late payment, and how you expect to get the funds to enable you to make the repayments. If you are at all unsure of any of these details, don’t take the loan. Get independent advice first.

“CAB advisers see people every day who took out a loan without considering all this, and are now so deep in debt they can’t get out of it. Their credit rating has been ruined, their day-to-day finances are even worse than they were to begin with, they are getting aggressive letters and phone calls from the lender, and their health and relationships are being affected too. The best decision you could make this year would be to give that misery a miss, and just make sure you think carefully before taking on any form of credit.

“Of course, in order to make informed decisions, people need to have all the information, and we believe that many loan companies are not presenting their terms and conditions clearly enough. And that’s the sort of issue that we hope the OFT will consider in their review, along with the tactics companies use in pursuing debts.

“We need to have a lending culture that is designed to empower and protect the consumer.”