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Payday lenders' broken promises exposed

Many payday lenders in Scotland are breaking the promises they made last year to clean up their act – according to new research published Thursday 21st November by Citizens Advice Scotland. 

One year ago this week, the main payday lenders published a voluntary Code of Conduct in which they acknowledged some wrongdoing in the industry, and set out a number of cast-iron guarantees to improve their operations so they offered fair and responsible lending in future. CAS has been asking payday loan clients all year to report their experiences, and in our report card today we can show that lenders have in fact broken most of the pledges in their own code.

Nearly 200 Scots completed our detailed survey in full. 65% of them applied for their payday loan online and 21% did so at a shop. Over half (53%) are under 34 years old, and over a third (36%) were using the payday loan for essentials like food, fuel and rent. Exactly half of the sample were in full-time work. 

In terms of the specific pledges made by lenders in their Code of Conduct, our Report Card below shows just how badly the lenders did. The main points include:

  • less than half of payday lenders in Scotland are telling people that loans should not be used for long-term financial problems;
  • only 1 in 3 are checking peoples’ financial background before giving them a loan;
  • only 14% of customers felt the lender was sympathetic when they got into difficulties repaying the loan; and
  • only a third of lenders are warning their customers about the dangers of roll-over loans. 

Presenting these figures, CAS Chief Executive Margaret Lynch says, 

“When the payday lenders published this voluntary code last year we made clear we would be watching them like a hawk to make sure they kept to their word. Because there’s no point making promises if you don’t live up to them. Our survey results – together with the experience of other clients we see every day in the CAB – show very clearly that this Code of Conduct Is being ignored repeatedly. 

“Across Scotland, CAB advisers are currently seeing over 100 cases every week of people who are in crisis debt to a payday lender. That’s a third higher than this time last year. Our evidence is that many lenders are operating in ways that result in people getting into debts they can’t handle. 

“So the Payday Lenders have had their chance to clean up the industry, and they have failed. It’s time now for the regulators to step in and do it properly. We are setting out today a number of steps that should be taken to get a firmer grip on payday lenders. We want to see an automatic fine for any lender who breaches the official regulations, together with compensation for customers who have been wronged. We’re also asking the Scottish government to open a Credit Union account for all 1st Year High School students in Scotland, to make people aware that there are alternatives to high-interest payday loans. (see attached document for our other recommendations) 

“We’re very grateful to all the people who responded to our survey. It is now closed, but if people want to report their experience of payday lenders or get advice on how to manage their debts, they can of course still contact us. Come to your local CAB or call us on our national helpline 0808 800 9060.”   

Payday lenders - our report card 

A year ago, a voluntary Code of Conduct was launched by the lending industry. It included 14 very specific pledges of how they would operate in future, and it was endorsed by 90% of all payday lenders in the UK.

Throughout the year, CAS has asked borrowers to complete our survey, which listed each of these 14 pledges in turn and asked them to report whether their lender had stuck to that pledge. It was a detailed survey, which took some time to complete. Nevertheless, 190 Scots did so over the course of the year. Their evidence is presented below. 

  • There were three promises on which a majority of lenders delivered (albeit not as unanimously as they should!) 
  • According to our survey, there were 11 pledges which a majority of payday lenders failed to keep. 

The document below shows the full details of the CAS Payday Loan Survey 2012/13 which was carried out between November 2012 and November 2013. 190 people responded to our survey, from all parts of Scotland.

Our full report shows some analysis of the main figures, and also lists the recommendations we are putting forward now.


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