CITIZENS’ advice bureau chiefs have welcomed action by the Government calling on high-interest loan firms to clean up their act.
The Office of Fair Trading (OFT) has given the country’s biggest 50 pay day loan companies three months to change their ways after uncovering evidence of irresponsible lending practices.
Hartlepool Citizens’ Advice Bureau (CAB) says it has been lobbying the Government for some time with concerns of such firms and sent evidence of local poor practice to national CAB bosses.
An OFT investigation found firms loaned cash to people without checking they could afford to pay it back and failing to explain how payments would be collected.
Hartlepool CAB, which is based in Park Road, says the £2 billion industry can push people deeper into debt.
Manager Joe Michna said: “Both CAB nationally and ourselves here in Hartlepool have expressed our concerns over a period of time at the way in which these pay day loan companies operate.
“We have sent evidence of the poor practices of these companies to the Citizens’ Advice Bureau nationally and we have been lobbying the OFT to investigate and take action.
“It is therefore good news for borrowers that the OFT has investigated the practices of these companies and given them 12 weeks to ‘clean up’ their act.
“We have had many clients who simply did not realise what they were getting themselves involved with when taking out pay day loans.
“The interest rates they charge are excessive and some of our clients have been pushed deeper into debt by taking out one of these loans.
“We are pleased therefore that the OFT has taken this action to protect future borrowers, many of whom live in Hartlepool.”
The OFT said it uncovered evidence of widespread irresponsible lending and failure to comply with industry standards.
Chief executive Clive Maxwell said: “We found fundamental problems with the way the pay day market works and widespread breaches of the law and regulations, causing misery and hardship for many borrowers.
“Irresponsible lending is not confined to a few rogue pay day lenders, it is a problem across the sector.
“If we do not see rapid, significant improvements by the 50 lenders we inspected they risk their licences being removed.
“Payday lending is a top enforcement priority of the OFT.”
The Consumer Finance Association (CFA) which represents lenders says since the review it has introduced various safeguards including credit checks on all new applicants, limiting loan roll overs and providing help to people who get into financial difficulty.