Citizens Advice has said that payday lenders should seize the opportunity to point people they have turned down for a loan towards debt advice.
New research from the Consumer Finance Association, which represents payday lenders, says that some people say they were left financially worse off after being turned down for a payday loan. Citizens Advice has warned that encouraging borrowers to take out unaffordable loans is not a solution to financial problems.
Gillian Guy, chief executive of Citizens Advice, said: “People should not be given payday loans they have no chance of repaying. Anyone who is turned down for a payday loan should be pointed towards free, impartial debt advice to help them address their money problems. Borrowers were only told about debt advice in just one in five payday loan cases people reported to us.
“It’s important the new rules introduced by the FCA clean up the payday loan market. The regulator needs to make sure that people aren’t being treated unfairly by lenders and are only allowed to borrow what they can afford to repay.
“As people continue struggling to make ends meet, the demand for short term credit will remain high. People need more choice when it comes to short-term credit. Increasing the number of credit unions will provide an alternative but so too will banks offering a responsible micro-loan.”