One and half million people took out a loan to fund Christmas according to the consumer group Which? – but how many failed to read the small print, and ended up out of pocket?
Pay Day Loan Companies signed up to a voluntary charter in November, but the Citizen’s Advice Bureau wants to go a step further – it wants an independent regulator with higher standards and laws to stop what it calls “bad practice”.
BBC Newcastle has been looking into one thing in particular – Brokers Fees.
They should be referred to in the small print, but despite that, they seem to have left a number of people out of pocket.
Fiona Marley Paterson reports:
Pay Day loan companies are of course legal lenders that are subject to some regulation.
Consumer Finance Association says there’s already statutory regulation in place because all pay day lenders need to have a consumer credit license issued by the OFT and are regulated by the Consumer Credit Act. It says the industry has now gone one step further with the voluntary charter. It also warns that if you’re going to take out a pay day loan you should understand the cost and how the loan will work, you should also make sure that your application is assessed properly so the lenders know you are able to afford it and always read the small print. Some people may still get into difficulty and that’s why the responsibe lenders have signed up to the charter and will do things like freezing interest and charges to help. You should always borrow direct from a lender; they will be a member of a trade association and have a consumer credit licence.
In relation to those fees by the brokers – we tried to contact the Association of Finance Brokers but were unable to speak to anyone.