Are payday loans fair and reasonable?

Mike Dailly, principal solicitor at the Govan Law Centre, who specialises in consumer legal issues, thinks payday and secured loans could be next mis-selling scandal.

In a recent briefing paper he argues that changes to the Consumer Credit Act (2006) may represent a potential gateway for consumer redress for the mis-selling of consumer credit and that there is at least a prima facie argument that credit agreements entered into could have either mis-sold and/or were unfair.

 

• Any creditor selling a loan must exercise reasonable care which would include properly assessing repayment affordability and creditworthiness over the period of the loan;
• In relation to pay day loans there is no fair or proper affordability checks as the lending takes place instantly online;
• In relation to pay day loans there is no fair, proper or sufficient explanation given to the customer of the suitability of the loan and the financial consequences of not settling the loan within the contractual term;
• The selling-method of pay-day loans and the absence of any cooling-off period, takes advantage of vulnerable consumers; and
• The relatively very expensive APR equivalent cost of the loan and use of roll-overs can entrap the consumer in a cycle of debt which grows unfairly in size and becomes increasingly more difficult to break the cycle of the debt; all of which would not have been clear or apparent to the consumer at the initial point of purchase.

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OFT to investigate payday loans.

 Now the OFT has launched an extensive review of the payday lending sector.

This is in part prompted by concerns that some payday lenders may be taking advantage of people in financial difficulty. The review will involve on-site inspections of 50 major payday lenders and surveys of industry and consumer organisations.

The OFT would like YOUR help. They are keen to seek opinion from the credit industry, debt advice industry and  payday loan customers.

Here is your chance to change shape the payday loan industry in the future.

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Source: http://www.consumeractiongroup.co.uk/forum/showthread.php?339665-Have-you-been-treated-badly-by-your-payday-loan-provider-The-OFT-would-like-YOUR-help.