Payday loan bosses hit back at MPs

Payday loan providers have claimed they have been unfairly branded as bad value for money by politicians.

Payday lenders claimed today that they are being unfairly tarnished by politicians who have "misunderstood" the service they provide.

Trade body the Consumer Finance Association (CFA) argued that while politicians tend to hold negative views towards payday lenders, most people who actually take out such loans believe they are getting good value for money.

It made the claims as it published a study, carried out by YouGov, which questioned 300 customers of payday lender the Money Shop, as well as 300 politicians, including MPs, House of Lords peers and councillors.

More than nine out of 10 customers believe payday lenders treat customers with respect, compared with just one in 20 of the politicians surveyed.

Some 89pc of consumers questioned said payday lenders explain their charges and fees clearly, but only 12pc of the politicians in the study hold this view.

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John Lamidey, chief executive of the CFA, said: "Payday loans can be misunderstood by politicians concerned for the welfare of their constituents in tough economic times.

"This research clearly shows that the people who actually use payday loans are extremely satisfied with them at every level."

Three quarters of payday loan customers said they were satisfied that they had received a fair deal representing good value, although a significant minority of 15pc were dissatisfied.

Payday lenders will face tougher scrutiny under a new financial regulator, with beefed up powers to impose unlimited fines on firms which breach the rules.

They will find it harder to enter the market and will also have to undergo more rigorous checks when the Financial Conduct Authority (FCA) takes control of overseeing the consumer credit market.

Last month, the Business, Innovation and Skills (BIS) Committee called for tougher action on "opaque and poorly regulated" commercial debt management companies and high interest-charging payday lenders.

The abuse of customers who are "over-indebted, vulnerable and desperate for help" has caused people to lose their home in some of the worst cases, MPs said.

The Office of Fair Trading (OFT) is also carrying out spot checks on 50 major payday lenders amid the concerns that people are being given loans without proper checks being carried out.

The CFA argued that most customers use short-term loans simply to "smooth out the peaks and troughs of their finances" rather than relying on them every month.

Half of customers surveyed use payday loans once a year or less and just 6pc use them monthly, according to the study.

By the Telegraph