Payday firms accused of missing affordability checks
Credit Today, 11 Mar 2014
An investigation by alternative lender Amigo Loans found payday lenders are ignoring affordability checks after its researcher was granted eight payday loans.
Lisa Kelly, a researcher at Amigo Loans, applied to a number of payday lenders in the UK and was offered eight loans simultaneously, meaning she would have to repay £2,853.
According to Amigo, her repayment the following month would have been almost eight times her disposable income, while not one lender questioned her financial commitments.
The company has urged the government and the Financial Conduct Authority (FCA) to take immediate action to tackle “exploitative” payday loan firms.
It highlighted the behaviour of payday lender MyJar which ignored the fact Lisa told the firm she already had five outstanding loans, while high street lender The Money Shop handed its researcher £250 in cash within three minutes.
Payday loan companies are not checking if people can afford to repay these loans. I only had to give basic information; the biggest lenders didn’t even ask me about my monthly outgoings.
The QuickQuid repayment alone would have left me with only £250 to meet all my monthly commitments; my rent alone is £600. I would have been forced to borrow more the next month and it would have spiralled out of control.
She applied for more than 40 loans in total and was turned down by a number of lenders as she already had a “damaged” credit history.
The payday firms which lent to Kelly were Wonga, QuickQuid, Cash Genie, MyJar, 247Moneybox, The Money Shop, MiniCredit and Speedy Cash.
James Benamor, found of Amigo Loans, added:
We are asking for complete enforcement of all existing legislation in relation to the conducting of affordability assessment prior to lending.
This is nothing short of scandalous and it’s impacting real people, every day.
The FCA has asked to review the evidence.
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