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Citizens Advice slams payday lenders for lack of affordability checks

The Citizens Advice Bureau has slammed the payday loan industry after it found lenders fail to conduct any financial checks in two-thirds of cases.

The CAB has accused the industry of failing to stick to its customer charter, which was published in November. The charter, which is voluntary, states payday lenders that sign up must offer clear information about loans, carry out sound affordability assessments and notify customers three days in advance of recovering payments.

In a survey of 1,270 loans taken out between 26 November and 31 March, the CAB found no financial checks were made in 65 per cent of cases, with seven in 10 borrowers unable to repay their loan.

Of those borrowers who experienced repayment problems, 85 per cent say they were not given the option of freezing interest and charges when agreeing repayments, 71 per cent of lenders did not explain how much it would cost to extend the loan and 84 per cent of borrowers did not feel they were treated sympathetically.

CAB chief executive Gillian Guy says over 11,000 people sought online help from CAB about payday loans during the period.

She says: “Payday lenders need to prove their charter is not just an empty gesture by making sure they check the loan is affordable and help those who struggle to pay back the loan.”

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Your Mortgage Decisions director Dominik Lipnicki says: “Vulnerable people can end up in a spiral of debt. It really does take advantage of people at their lowest point.”

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