Viewpoint: Payday lending – how can councils help?

Monopoly Money

The LGiU is working with Citizens’ Advice to help councils better understand how they can support those falling into debt through use of payday loans. We hear from Ashley Scarfield, Campaigns Officer at Citizens Advice, who tells us about the launch of their new series of blogs on how local authorities can tackle irresponsible lending.

Jenny, a single mother of two children, had considerable debts, with over £10,000 of debt as well as rent and council tax arrears. She took out two payday loans, which were each then rolled-over at least five times. Despite clearly being in financial difficulties and struggling to make repayments, both payday lenders continued to rollover her loans leaving her unable to meet her debts. When she visited her local CAB she was at risk of losing her home.

Sadly Jenny’s case is not an isolated one; over the last four years at Citizens Advice we’ve seen a ten-fold increase in the proportion of our debt clients that have a payday loan. This increase in the use of payday loans, twinned with the evidence we have of payday loan companies breaking their own promises and not treating their customers fairly, have been a real cause for concern.

This is why Citizens Advice has been campaigning for much better regulation of payday lenders. The good news is that in April this year the Financial Conduct Authority will be bringing in a new set of rules for the industry and will have strong powers to enforce them.  Payday lenders will have to do proper affordability checks, they won’t be able to repeatedly roll over loans like they do now and there will be more controls on the way they take payments from their customers. This new regulatory regime will hopefully weed out the irresponsible lenders and better protect consumers.

However, we must also address the wider issue of how and why so many people are getting into this sort of financial difficulty, and why they are using high cost short term credit, like payday loans. It’s not just the individual in debt who suffers when things go wrong. If people like Jenny are struggling to pay priority debts and are losing their homes, this will be affecting the wider community too. 

We know many local authorities are concerned about this and we also realise that councils are under huge financial pressure at the moment. However, we do think there are ways councils can help people avoid getting into situations like Jenny’s, and we’re keen to support them to do this.

The first step is to start sharing ideas, so starting this week we will be hosting a series of guest blogs from councils, as well as organisations such as the LGiU, in which they talk about the work local authorities are doing to tackle irresponsible lending practices. We will hear about what a number of councils across the country are doing; from tackling payday loan companies’ marketing practices on the high street, to providing educational programmes to give people the skills they need to manage their finances.

We hope this will inspire councils to look seriously at what steps they can take, but it is also a chance for councils to tell us what additional support they need to tackle payday lending from both the Government and/or charities such as Citizens Advice or organisations like the LGiU.

So please do visit our website, have a look at the blogs page, and use the comment boxes to let us know your views.

You can keep up to date with all the latest news from the campaigns team at Citizens Advice by following @CABaction.

Read Jonathan Carr-West’s top tips on how local authorities can support those struggling with personal debt.

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