New payday lender rules welcomed amid complaints warning

A CHARTER aimed at reigning in payday lenders has been welcomed in the city.

Since Monday (November 26), high-interest lenders have been told to stick to guidelines under a new customer charter.

Coventry Citizen Advice Bureau described it as a great step but warned complaints could rise. They said 60 per cent of their clients had admitted to using short-term loans.

The charter means lenders must offer clear information on how a loan works and give an example of the price for each £100 borrowed including any fees and charges.

Customers must not be pressurised into decisions and an assessment must be carried out to ensure they can afford it. Interest and charges must also be frozen after 60 days if the customer comes under financial strain.

The charter was drawn up by four trade bodies which cover 90 per cent of the market.

In it, they insist: "We are committed to complying with this Charter and we will be independently monitored to make sure that we do so."

Sophie Parkes, Coventry CAB social policy officer, said caseworkers would go through a checklist with clients and a complaint would be fired to regulators if any faults were found.

"We think the charter is a great step to bring about changes, as some of these simple procedures are not being carried out at the moment, including credit vetting and explanation of Continuous Payment Authorities.

"At the moment a CPA is taken from a client’s bank with no regard of priority debts their customers may need money to pay, such as rent, council tax or gas.

"There are also huge recovery fees associated with the recovery attempts, so hopefully the new rules in the charter for clarity around CPAs and pre warning will start to address this."

However, she predicted a big rise in complaints was a possibility.

"Obviously the intended improvements will not address why people may take out a pay day loan in the first place, but we hope this may ease the payday loan spiral a little and we continue to promote financial capability and Credit Unions to our clients and Coventry as a whole."

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