Payday lenders in the UK have been under immense pressure from the government for exploiting what authorities refer to as “vulnerable consumers.” But payday lenders are fighting back as a recent report painted a very different picture of the sector’s consumer profiles.
According to The Telegraph, the Consumer Finance Association (CFA), the organization that represents payday lenders, presented members of Parliament with a report on customer data during a briefing in London this week. The report indicated that the individuals using short-term lender services were generally “intelligent, and financially-savvy consumers.”
The report, which was titled “Credit Crunched,” unveiled that over a third of consumer borrowers made £10,000-£19,999 per year. Lenders said that they were helping customers who were denied by high street bank institutions and argued that it was a much-needed service.
The report broke down the short-term lenders customers into three main groups: 25-35 year olds who were often tech-savvy, single and did not own their own home, 35-44 year olds with children and sought payday loans to help pay utility bills, and a group they called “burdened baby boomers,” who used the money to help family and children. It was implied that although these groups faced financial challenges, they were by no means vulnerable or naïve.
“They are intelligent, financially-savvy consumers who are making critical, proactive and positive financial decisions every day to help them live within their means,” the report said, according to The Telegraph.
UK Payday lenders have been forced to stand their ground due to recent threats from the Office of Fair Trading. The OFT has criticized the loan sector for targeting weak consumers, and threatened to put them out of business unless they begin improvements in the new few weeks.
The OFT did some investigating back in March 2013, and discovered that the majority of payday firms were relying heavily on customers who were having financial struggles. Most of these customers were unable to pay back loans on time and the watchdog found that about half of the lenders’ profits were coming from loans that were refinanced or rolled over.
As the OFT continues to pursue formal investigations, three firms have already been stripped of their license and two have willingly given up their licenses since the reviews began.
The association is demanding 50 payday lenders to take immediate action within 12 weeks or risk losing their business.
To read the full story at The Telegraph click here.
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