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Citizens Advice criticises ‘irresponsible’ payday lenders

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Two-thirds of payday loan cases have had no financial checks carried out to make sure borrowers will be able to repay the loan, according to research by the Citizens Advice.

The charity has branded the lenders ‘irresponsible’ for not attempting to ensure borrowers will be able to repay, something which has led to 70% being unable to pay back their loans.

The figures took into account 1,270 loans from 87 different payday lenders between November 2012 and March 2013. This included one case where £57 was repaid each month on a payday loan of £500 but the debt still stood at £437 after six months.

Citizens Advice added that over 70% of lenders did not explain how much it would cost the consumer to extend the loan while 84% of customers felt they were not treated sympathetically. 

Gillian Guy, Citizens Advice chief executive, said: “Payday lenders are not standing by their word to treat people fairly by checking they can actually afford the loans on offer.

“The knock-on effect of their irresponsible lending is devastating for families as they become consumed with debt. Many find they have no money to put food on the table, pay the bills or get to work as lenders drain their bank account in a bid to claw back the debt.

“Payday lenders need to prove their charter is not just an empty gesture by making sure they check the loan is affordable and help those who struggle to pay back the loan.”