CITIZENS advice chiefs have welcomed the Government’s cap on controversial payday loans - saying it will help to clean up the money lending market.
The Chancellor George Osborne announced the cap, which will cover fees on the lending as well as interest, earlier this week and said the move will prevent vulnerable consumers being exploited.
The Citizens Advice Bureau has always maintained any cap should be on the total credit and bosses praised the Government for tackling the overall cost.
Joe Michna, manager of Hartlepool CAB, based in Park Road, said people are finding themselves in serious debt after turning to what is described as a quick fix and taking out a payday loan.
He told the Mail: “Hartlepool CAB has seen many people driven deep into debt because of payday loans.
“Problems that we have come across include irresponsible lending, inadequate checks on borrowers, taking more than is owed, draining bank accounts, harassment and refusal to agree to repayment plans.
“People are finding themselves in serious debt as what is often described as a quick fix turned into a long term debt problem, especially as in many cases people are being given loans without proper checks to ensure they can repay.”
Mr Michna said the Government now needs to put pressure on traditional lenders to introduce “responsible short-term micro loans” as an alternative to payday loans and said the banks need to step forward with more options for people who find themselves in sudden financial difficulties.
The level of the cap, which has not yet been announced, will be decided by the new industry regulator, the Financial Conduct Authority (FCA). The Chancellor has denied making a u-turn despite the Government previously claiming that a cap on payday loans wasn’t needed.
A recent survey carried out by the Citizens Advice Bureau found 61 per cent of payday lenders did not establish whether a potential borrower could afford to repay the loan and 70 per cent put pressure on borrowers to extend their loans despite 82 per cent failing to highlight the risks of extending a loan.
Mr Michna added: “If you are struggling with debt or are in a sudden financial crisis situation and considering taking out a payday loan, contact your local CAB. There are other options for help including joining the local Credit Union or contacting Hartlepool Borough Council’s local welfare support service in the Civic Centre.”
To contact Hartlepool CAB call (01429) 408401 or call into a drop in session from 9.30am-3pm on a Monday, Wednesday or Friday.