Payday Loans Still Not Safe, Says Scottish Charity
February 26, 2015
Recent moves to tighten up regulations relating to the payday loans industry in the UK are welcome but do not make these short-term services “safe overnight”, according to Citizens Advice Scotland.
The charity has long been campaigning for a clampdown on the activities of payday loan companies, which it sees as lenders of money on dangerously expensive terms and a key source of concern among thousands of heavily indebted Scottish households.
The Competition and Markets Authority (CMA) recently announced that it will be forcing payday lenders to have their deals featured on at least one price comparison website. And, while the step was welcomed, Citizens Advice is keen to see much more done to protect vulnerable borrowers from using services that offer poor value.
“Most people would find better deals elsewhere, such as with their local credit union or social enterprise lender,” said Fraser Sutherland, a spokesperson for Citizens Advice Scotland.
“So any price comparison site must be able to provide a picture of the whole market and not just refer on to the company willing to pay the biggest commission, as some shockingly bad brokers currently do.”
The CMA’s new rules will oblige payday lenders to feature their deals on price comparison websites on the basis of support from the Financial Conduct Authority (FCA), which itself recently introduced new laws that limit the scale of fees and interest payday lenders can charge their customers in the UK.
For its part, Citizens Advice Scotland wants to see anyone struggling with personal debt problems to avoid using payday loans even if they believe they will be able to manage the costs involved.
“We would encourage anyone struggling with their finances and already in significant debt to not fall into the trap of poor value borrowing as our evidence of thousands of clients shows it only makes the situation worse,” said Sutherland, the Citizens Advice Scotland spokesperson.
According to charity’s own figures, roughly 100 people reach out to Citizens Advice for help and guidance in dealing with payday loan related debt problems every week across Scotland.
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