Plans for lender code of conduct

Published on 26/05/2012 18:34

AFTER a week when the Church of Scotland expressed concern about payday loans and Wonga was criticised by the Office of Fair Trading, the Westminster government has announced plans of a new code of conduct for payday lenders.

Business minister Norman Lamb said the trade associations representing the short-term loan industry have agreed to a new code of practice which will deliver better consumer protection.

However, the new measures fall short of the stricter regulation which has been called for by Labour Party MP Stella Creasy, who has been campaigning to curb the payday lenders.

Citizens Advice Scotland spokesperson Jeanette Campbell said: “We are becoming increasingly concerned about the impact of payday loans. The evidence from CAB offices across Scotland shows that this type of loan is leaving more and more people in the misery of un-manageable debt.

“Any moves to improve the provision of clearer information to consumers has to be seen as a step in the right direction.

“However, this is only one step against what is clearly a growing problem.”

The Consumer Credit Counselling Service estimates payday loans are used by 1.2 million people in the UK – including 100,000 Scots each year. Companies such as Wonga.com advertise heavily on television and are increasingly used by people struggling to pay their household bills.

Michael Ossei, personal finance expert at uSwitch.com said: “We would always caution consumers against taking out payday loans as they are an extremely expensive way of borrowing.

“If you need a short-term loan it’s always better to explore options such as an overdraft or a credit card first. ”