Consumer Council and NICVA welcome provisional findings of the CMA payday lending market investigation
Speaking about the CMA investigation, Aodhan O’Donnell Consumer Council Interim Chief Executive said; “Payday lending has a significant effect on the most vulnerable consumers and these findings highlight a worrying lack of clarity within the payday loan market. This leaves people with little option but to pay excessive charges for payday loans. The results of the investigation also show a lack of clarity around how costs are calculated, which prevents consumers from easily comparing the price of different loan providers.
Aodhan added; “The Consumer Council will be issuing a response to these provisional findings on 4 July 2014 to ensure that consumers in Northern Ireland are fully represented, and also to encourage positive actions to be taken forward to protect consumers. However, we are pleased that the CMA has issued a notice of possible remedies. These include a requirement on lenders to disclose fully the costs and charges payable if customers fail to repay their loan on time, and periodic statements showing customers the long-term cost of their borrowing.
Aodhan concluded; “There needs to be more affordable credit options for consumers, to prevent people from having to resort to high-cost short-term credit, which can often have long-lasting consequences on finances. We are working with NICVA on taking this forward.”
Seamus McAleavey from NICVA said; “A recent review we undertook found that it is too easy for people to get into debt with a number of lenders. We saw many cases where a relatively small initial loan spiralled into a debt of thousands of pounds. Ironically it seems that many people’s financial situation actually worsens as a result of using payday loans.
“These loans are being taken out by people on low incomes who are in work, as well as people who are not in work. They are using the money to make ends meet and pay for essential items such as utility bills and school uniforms. These initial findings are very useful and we will be taking them into account as we look at alternatives to payday loans in Northern Ireland,” said Seamus.
The Consumer Council has developed an ‘Understanding Payday Loans’ guide to help consumers get to grips with how payday loans operate and the costs associated with this type of borrowing. This is available to download from the Consumer Council’s website along with ‘Thinking about borrowing money – your guide to different types of credit’ or by contacting the Consumer Council on 0800 121 6022.
NICVA's Centre for Economic Empowerment (CEE) project launched a discussion paper; Expensive Lending in Northern Ireland, last year highlighting some key concerns in relation to payday lending and loan sharks in Northern Ireland.
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