CONTROVERSIAL payday loans companies seemed willing to offer more than £1,600 to an undercover Mail reporter in just a few hours.
The UK payday loan industry, which hands out eight million short-term loans a year and is thought to be worth £2bn, has been told by the Government to clean up its act, or risk being stripped of their licences.
However, in just three hours we found companies across Hull – widely recognised as one of the UK’s most deprived cities – apparently willing to lend us £1,630, with high APR, after we produced a fake bank statement, gas bill and wage slips bought over the internet as “proof” of address and earnings.
Going door-to-door around the city’s money lenders, our reporter collected provisional offers of loans ranging from £130 to £500.
Our investigation shows just how easy it could be to obtain large sums of cash, despite not having the means to pay it back, potentially leading to crippling debt.
Hull East MP Karl Turner praised the Mail for highlighting the issue and pledged to urgently raise our “frightening” findings in Parliament.
Matthew Cawley, a consumer empowerment partnership officer at Hull and East Riding CAB. who shares the politician’s concerns about payday loans, said: “We have seen a rise in the number of people coming to us with problems repaying payday loans.
“Our biggest concern is the number of people coming to us with more than one payday loan. People are taking out one payday loan to pay off another and it can quickly spiral into a big mess.”
All but one of the lenders we visited said a formal credit check – which might indicate if someone had another payday loan or who was struggling with debts – was not required.
Instead, staff seemed happy either to offer us payday loans straightaway after seeing our fake paperwork and a genuine bank card – or asked us for another month’s worth of statements, which could have been posted to us within just 24 hours.
Experts say payday loans rely on what is known in the banking sector as “continuous payment authority” (CPA).
Payday loan customers are required to allow their debit card details to be stored, which enables funds to be automatically deducted on a given day.
It works like a direct debit, but they are very difficult to cancel and they do not offer the same guarantee if the amount or payment date changes.
Mr Cawley was unable to discuss specific lenders, but explained how CPA is usually the source of people’s financial turmoil.
He said: “Direct debits, such as for a gym membership for example, can be cancelled, with a quick call to the bank.
“But with CPA, it is different. Often, it can be very difficult to cancel.
“It tends to be the cause of most problems we see at the CAB, either because someone’s pay doesn’t go in on time, or the lender decides to take out a higher amount or perhaps chooses to take the cash earlier than agreed.
“CPA can kick off a lot of extra debts – for example, in bank charges. It can very quickly snowball out of control.”
Two of the payday lenders we visited were in Mr Turner’s constituency.
He said: “Payday loan companies are only too glad to lend to people that simply cannot afford to make repayments.
“I have a fair amount of case work on this issue. Unfortunately, the law provides for interest rates and APR to be unlimited providing the lender complies with the relevant regulations.
“I’m also interested in the fact that fraudulent identification documents are easily obtainable online.”