Which? statement ahead of payday loan summit

Ahead of the Government-led summit on payday loans, Which? executive director, Richard Lloyd, said:

“Payday lending is dogged by poor practice yet people are increasingly turning to this very high cost credit to cover essentials or pay off existing debts. A clear message has been sent to lenders to clean up their act but the regulator must back this up by enforcing proper affordability checks and punishing lenders who flout the rules.

“We also want more action from the Government to tackle this toxic market. We want new rules banning excessive charges, a restriction on the number of times a payday loan can roll over and clearer advertising to help people struggling with spiralling debt.”

Recent research

Our latest consumer tracker1, which monitors how consumers are coping with their finances, shows:

·         4% (around 1 million households) take out payday loans each month;

·         Around four in ten (44%) of people are worried about their household level of debt.

Which? findings on credit2 have revealed:

·        Eight in ten of us (79%) – around 38.5 million adults – use some form of credit

·        Four in ten (38%) of people who take out payday loans use them to pay for essentials like food or fuel.

·        A quarter (24%) of people with payday loans use it to repay other credit.

·        Seven in ten (69%) of payday loan users have regretted taking out credit in the past and half (49%) of payday loan users have taken out credit it turned out they couldn’t repay.

·        Three in ten (28%) of credit users say they don’t like debt but see it as a necessary part of their life.

·         Nine in 10 (89%) people think that payday loan companies should always include the cost of borrowing in advertising – a similar percentage (87%) think adverts should include prominent text saying that if you are struggling with debt you should get free advice from a debt advice organisation.

We want:

New responsibilities placed on lenders and the regulator to take action today to clean up the payday industry

– Firms must lend responsibly, ensuring thorough affordability assessments that assess the borrower’s income, expenditure, any outstanding credit commitments and overall ability to repay the debt.

– The OFT must continue to clean up the market by enforcing proper affordability checks and swiftly removing licenses from lenders who flout the rules.

New rules on charges, roll overs and advertising should be introduced by the Government and the FCA in April 2014 

– Excessive default fees and charges should be banned

– Lenders should be forced to freeze charges for borrowers in difficulty and prevented from charging interest on high cost loans beyond 30 days after borrowers default

– Strict limits should be in place over the number of times payday loans are rolled over

– The cost of payday loans should be advertised prominently as £’s per £100 borrowed over 30 days

– Clear and prominent health warnings must be given highlighting the consequences of missed payments.


The latest information and research on consumer credit and spending can be found on the Which? Consumer Insight Tracker http://consumerinsight.which.co.uk/

Which? has consumer advice regarding payday loans on its website: www.which.co.uk/consumer-rights/search/?q=payday

1 Populus, on behalf of Which?, interviewed 2,056 UK adults online between 24 and 27 May 2013.  Data were weighted to be demographically representative of all UK adults.  Populus is a member of the British Polling Council and abides by its rules

Populus, on behalf of Which?, interviewed a random sample of 4,031 GB adults aged 18+ online between 10th and 12th August 2012.  Surveys were conducted across the country and the results have been weighted to the profile of all GB adults. All stats referring to credit users are based on 3,195 consumers who said that they use at least one credit product. Populus is a founder member of the British Polling Council and abides by its rules.


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