Payday lenders expected me to me to pay back eight times my monthly disposable income
Press Release - 6 March 2014
- An investigation by Amigo Loans reveals payday lenders are ignoring affordability checks
- Researcher was able to hold eight payday loans simultaneously
- One lender automatically gave weekly repayments - this would take 18 months to repay and an advance of £130 would cost £674
- Another lender ignored the fact the researcher already had five outstanding payday loans
Amigo Loans is calling on the government and FCA to take immediate action on exploitative payday loan companies.
The loan company which helps people turned away by mainstream lending, undertook its own investigation into the practices of payday loan companies. This revealed they are pushing customers into dangerous financial situations by failing to undertake proper income and expenditure checks.
Over the course of a few days, its researcher Lisa was granted eight payday loans meaning she’d have to pay back £2,853. Her repayment the following month would have been almost eight times her monthly disposable income. Not one lender properly questioned Lisa on her financial commitments.
One payday lender, MyJar, even ignored the fact that Lisa told them she already had five outstanding loans.
MoneyShop, one of the UK’s largest high-street lenders, handed Lisa £250 in cash within three minutes, after only asking if any of her address details had changed since she’d taken out a loan the previous month.
Two of the UK’s biggest lenders asked zero questions about Lisa’s outgoings and automatically lent her almost double and triple her monthly disposable income respectively.
I volunteered to do this research because I had experience of using payday loans and was shocked by their practices. I knew it would really damage my credit file but I don’t care if it means other people are warned off or the government actually does something about this.
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."
In total Lisa applied for over 40 loans. Lisa already has a damaged credit history and was turned down by a number of payday companies, but some of the biggest names lent to Lisa simultaneously.
Shocked by its findings, Amigo Loans has written to MPs and consumer groups including Which? and CAB with the results of its investigations. The FCA has also asked to review the evidence.
James Benamor, founder of Amigo Loans, said:
I am urging the government to take immediate action. 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.