Payday loans market rife with poor practiceNew Which? research reveals payday loan failings

24 September 2011


Which? Money research has unveiled a catalogue of payday loan poor practice

A new Which? Money investigation has uncovered widespread poor practice in the payday loans market.

Failings unveiled by the research included potential breaches of the Consumer Credit Act, poor privacy provisions and inflated APRs.

With the take up of payday loans on the increase, we've reported two lenders - and - to the Office of Fair Trading (OFT).

Although the company that owns, Easyloans Ltd, does have a Consumer Credit Licence, this does not cover the name therefore appears to be operating without a valid licence. failed to show the APR for its loans anywhere on its website.

Payday loans are an absolute last resort

Which? executive director, Richard Lloyd, says: 'Payday loans might seem like a good solution for people whose money won't stretch to the end of the month, but they should be treated as an absolute last resort. They can be an incredibly expensive way to borrow and we've uncovered a long list of poor practice by lenders.

'A temporary overdraft extension can be a much cheaper, safer way to borrow, so if you're struggling to get to pay day then the first thing you should do is talk to your bank.

'With increasingly squeezed household budgets, more people are taking out payday loans so it's vital that regulators keep a close eye on providers and deal firmly with any lenders breaking the rules.'

Unsolicited third party emails and phone calls

Which? has also reported Casheuronet UK, which operates and, to the Information Commissioners' Office (ICO). only has one tick box to cover both its terms and conditions and privacy policy. In order to accept the terms and conditions and therefore continue the application, the customer must also consent to sharing their personal data with third parties. 

Casheuronet UK, which owns, told Which? that it does not share customer data with third parties. However, within a few days of making his application, the Which? Money researcher had received 47 unsolicited emails and numerous phone calls from payday loan, impaired-credit and claims management companies. Casheuronet UK is investigating the matter.

Loan rollovers and automatic increases

Other examples of poor practice included potentially misleading claims about APR, as well as firms encouraging customers to borrow more than they need and to rollover existing loans for several months.

As soon as our research submitted his application to Quickquid, the on-screen message read: 'Need more time to pay back your loan? Don't worry, you still have five extensions available.'

When he revisited the website after repaying the initial loan, he was offered a new loan of £1,200.

Which? also found that several firms had lax website security. For example, does not use the more secure https:// website setting. And yet, on its application page it asks for personal data including bank account, employer and salary details, as well as National Insurance, driver's licence and passport numbers.

The high cost of borrowing

Payday loan providers typically charge from £20-£35 for a short-term £100 loan. The most expensive Which? found was offered by, which quoted £36.72 for a 30-day loan of £100 – equivalent to an APR of 4,394%. The same amount borrowed through an authorised overdraft from Which? Recommended Provider Co-operative Bank would cost just £1.35.

Some payday lenders base their rates on your next payday, so you pay the same amount of interest whether you borrow for 14 or 31 days. On 14 August, we asked PaydayUK for a quote on a £100 loan, setting our payday as the last day of the month. We were still quoted the standard charge of £25, despite the short period - equivalent to an APR of 16,203%.

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