Call for action against 'out of control' payday loan industry

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Payday loan companies routinely fail to treat their customers fairly and often encourage those struggling to repay the debt to extend their loan, according to research from the Citizens Advice Bureau (CAB).

The CAB has called on the Office for Fair Trading (OFT), which is conducting its own probe into the payday lending industry, to immediately ban those lenders its investigation found are causing harm to borrowers.

Analysing customer feedback on 2,000 payday loans from more than 110 different payday lenders - including in-depth scrutiny of 780 cases - the CAB found widespread failings among providers.

Among them were that 87% failed to ask the borrower to provide documents to prove they can afford to repay the loan, and that 58% did not warn that a payday loan should not be used for long-term borrowing or to deal with money troubles.

Additionally, 84% of people who had repayment problems were not offered the chance to freeze interest and charges when they were struggling to pay it back, while 72% actually put pressure on people struggling to repay to extend their loan.

Citizens Advice chief executive Gillian Guy said: "The payday loan industry is out of control and is acting as a law unto itself.

"It has showed a complete disregard for its customers. Many have been driven into debt by irresponsible lending and their debts ballooned as lenders put pressure on them to extend the loans.

"The OFT has an opportunity to wipe out the distress caused by this industry and make sure it is transformed into a responsible short-term credit market."

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