Payday lenders to share 'real time' information on consumers as research reveals nearly one million people took a loan in 2013
Wednesday 15 January 2014
Payday lenders including Wonga are set to start using a new “real-time” information sharing service about consumers' to stop people taking out multiple loans from different services.
The news comes as research from Shelter estimates nearly one million people have taken out a payday loan in the last year to help cover their rent or mortgage costs.
The housing charity said that one in 50 (2 per cent) people it surveyed had taken out a short-term loan, which would equate to nearly 885,000 adults if the findings were projected across Britain.
Shelter said it dealt with just under 9,000 calls to its helpline from people struggling to pay their rent or mortgage last year, rocketing by one third (32 per cent) on the total for 2012.
Liz Clare, a helpline adviser for Shelter, said: "Times are tough, and we often hear from people who've reached crisis point because they haven't felt able to ask for help earlier."
The new information service for payday lenders is being launched by credit reference agency Callcredit to tackle concerns that lenders should have the most up-to-date and accurate snapshot of a potential borrower's circumstances when they make a loan request.
The agency said the initiative will have a "major positive impact for both lenders and consumers".
The move comes after the Business, Innovation and Skills (BIS) Committee called in December for better sharing of up-to-date information between payday firms so they can stop struggling borrowers from spiralling into further trouble by taking out multiple loans with different lenders.
Earlier this week, consumer group Which? accused payday lenders of "exploiting" customers who default on loans with over-the-top fees that raise the risk of them spiralling further into debt.
Wonga's default fee of £30 was found to be the highest in the Which? research of 17 payday firms. Wonga said the fee is set out clearly and reflects the extra costs it incurs when someone fails to pay their loan back on time.
Lenders will begin testing the new information system in April, with the aim of it being used to help enable more accurate lending decisions from early May.
The new service will include information such as whether payments have been received as expected, any rollovers to loans and and extensions to credit or changes to payment terms.
Callcredit said that although much interest in the initiative has come from short-term payday lenders, it will not just benefit this sector and there has also been an appetite for it from the "mainstream" lending industry.
Any lender that contributes to the initiative will be able to access it and consumers will also be able to see it included in credit reports.
Peter Mansfield, managing director of Callcredit Limited, said: "The lending landscape has changed considerably over recent years.
"There is a growing consensus that the availability of more frequent data-sharing is required to ensure responsible lending in certain sectors."
The whole payday lending industry is being investigated by the Competition Commission following concerns raised that some lenders appear to have been basing their business models around borrowers who cannot afford to pay back their loans on time.
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