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Differing Opinions Regarding UK Payday Loans

by Jim ONeil on June 26, 2012

in Payday Loans News

A recent survey conducted by YouGov reveals that consumers and legislators have very different opinions regarding payday loans. The study was commissioned by the Consumer Finance Association (CFA) and is one of the largest research undertakings in the payday lending industry. Three hundred Councillors, Peers, and MPs and 300 payday lending customers were surveyed regarding their attitudes and opinions. The results are eye-opening, to say the least, and indicate that additional education of politicians is needed.

People who have used these short-term, no credit check loans expressed their satisfaction. Good customer service and a fair deal were two of the positive aspects. Of those surveyed, 93 percent felt that payday lenders treat their customers with respect and dignity. In sharp contrast, only five percent of policymakers held this view. Eighty-nine percent of consumers said that loans APR, fees, and other charges were clearly explained, while only 12 percent of the surveyed legislators had this view.

Based on survey respondents, £17,582 is the average personal income of consumers using these no credit check loans. This is £4,707 more than the current minimum wage. Forty-five percent of those surveyed fell into the ABC1 socioeconomic group. This indicates that payday loans are being chosen for reasons other than necessity. Convenience is one factor that leads many people to use this financing.

Consumers surveyed by YouGov were taken from customer base of The Money Shop, one of the largest and oldest UK payday lenders. Overall, the findings of the YouGov survey support the Precious Plastic consumer credit report, independent research from PricewaterhouseCoopers that was released earlier this year. More consumers are becoming underbanked due to the restrictions with loans bank provided. Consumers who have trouble securing credit from conventional sources are flocking to alternative financing like payday loans.

CFA Chief Executive John Lamidey commented on the YouGov report, saying that politicians can misunderstand payday financing. The research indicates that actual customers are satisfied with these lenders, from all perspectives, he said. Mr. Lamidey also pointed out that most customers use this financing on a sporadic basis rather than regularly depending on it. According to the survey, 50 percent take a loan once per year or less frequently, six percent use this financing monthly, and 28 percent use these loans every two to three months.

Mr. Lamidey made some specific comments regarding high payday loans APR. He noted that lenders clarify things for customers when they explain the total cost of this credit in real terms rather than APRs. This enables customers to understand how much their loan will cost, putting things into perspective and illustrating how the financing is typically less expensive than it seems.

The CFA chief executive explained that his organization intends to promote best practices and drive industry improvement. To this end, it lends support to and participates in industry research and governmental reviews. The CFA meets regularly with ministers, MPS, regulators, and civil servants to share knowledge regarding the payday lending industry. Based on the survey results, the organization plans to continue raising awareness with politicians.

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