News item

Trading Standards' warning to payday lenders

The Trading Standards Service in Northern Ireland is warning payday lenders to raise standards or face enforcement action following a recent survey.

The Trading Standards Service has conducted a month-long survey into the lending practices of payday loan businesses operating in all the major towns and cities in Northern Ireland. The survey was carried out to check compliance with consumer credit legislation and the Office of Fair Trading’s (OFT) Guidance on Irresponsible Lending.

Payday loans are short-term, high interest, unsecured loans, typically repaid when the borrower receives his next pay cheque – usually within 30 days of having been granted the loan.

The survey revealed a number of areas of concern for TSS. Many lenders failed to carry out credit checks, adequately explain the borrowing costs involved, as well as offering to roll over loans so that charges escalate and the loans become unaffordable.

As part of the mystery shopping exercise, visits were made to the premises of 29 payday lending businesses throughout Northern Ireland. The Trading Standards Service uncovered the following:

*One payday lender agreed to provide a loan within 24 seconds.

*In almost a third of the visits, the payday lender indicated that they would not carry out a credit reference check on the borrower.

 *Half of the premises visited indicated that they would still be willing to lend £100 even if a borrower failed a credit check.

*Almost half of the payday loan companies visited indicated that they would be prepared to ‘roll over’ the loan for another month if a debtor could not repay on time.

 *In every case, the payday lender was unwilling or unable to quote the Annual Percentage Rate (APR).

*In the majority of cases, the lender was unable to adequately explain the consequences for failing to repay the loan on time. Most lenders indicated that there would be a £25 default fee charge but could not give further information about any additional charges or interest being applied.

Damien Doherty of Trading Standards said: "Payday loans are usually expensive and are offered at high rates of interest. Unfortunately, many of the consumers that take out such loans are already in debt, vulnerable and have nowhere else to turn to."

"In many instances, the borrower will be able to repay the loan when it is due. However, if a consumer is unable to repay the loan on time and is forced to roll-over the loan into another month they can quickly get into difficulty due to the additional default and interest charges. We have seen examples where payday loans have spiralled out of control, which only adds to the indebtedness of the consumer.

 "We are highly concerned by the results of this survey. It would appear that many lenders are giving out loans, more or less immediately, without checking adequately that the borrower can afford them or that they fully understand the cost of the product."

"All payday loan companies are well aware that they should be adhering to their legal obligations under the Consumer Credit Act as well as meeting the standards set out by OFT’s guidance on irresponsible lending.

"The findings of this survey are unacceptable. We will be contacting those businesses that were non-compliant to ensure that they raise their standards, but we will also not hesitate to take enforcement action where necessary. TSS can make representations to the OFT about a trader’s fitness to hold a consumer credit licence. If minded to do so, the OFT can impose requirements on a business and, in more serious cases, even revoke the licence."

The Trading Standards Service is advising people who decide to use a payday loan to make sure they understand the costs and charges first. People who are worried about their financial circumstances should seek independent debt advice.

For free independent debt advice, consumers can contact their local Citizens Advice Bureau at or Advice NI, under the banner of ‘Debt Action NI’, at

Alternatively, consumers can use the DETI sponsored telephone debt advice service, 'advice4debtni' on 0800 917 4607 or log onto

Consumers who have a complaint about a payday loan should contact Consumerline on 0300 123 62 62 or 028 9025 3900 or alternatively log on to the Consumerline website at

Further information can be found at and

Notes to editors:

1. The Consumer Credit Act 1974 (as amended) requires businesses offering credit, lending money or involved in activities relating to credit or hire to be licensed by the OFT.

2. The OFT's irresponsible lending guidance was published in March 2010 (updated February 2011). The guidance outlines the standards expected of consumer credit businesses including payday lending companies and states that they should make an assessment of affordability before granting loans. The guidance also highlights that creditors should treat borrowers fairly and with forbearance if they experience difficulties repaying their loans. Similarly, the guidance sets out examples of irresponsible lending practices which, if engaged in, would call into consideration the fitness of the business concerned to hold a Consumer Credit Licence.

3. In February 2012, the OFT 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 investigate compliance with the Consumer Credit Act and the OFT's guidance on irresponsible lending. Evidence gained during the review will be used to boost standards across the sector and to drive out companies that are not fit to hold consumer credit licences. There are a number of issues of concern that the OFT will focus on during the review, including:

*Giving loans without first checking adequately that the borrower can afford to repay them.

*Inappropriately targeting particular groups of people with clearly unsuitable or unaffordable credit.

*Rolling over loans so that charges escalate and the loans become unaffordable.

 *Not treating borrowers that get into financial difficulties fairly.

The review will involve on-site inspections of 50 major payday lenders and surveys of industry and consumer organisations.

4. For press enquiries please contact DETI Press Office on tel: 028 9052 9604. Out of office hours please contact the Duty Press Officer via pager number 07699 715 440 and your call will be returned.