REVIEW OF PAYDAY LENDERS COMPLIANCE WITH THE IRRESPONSIBLE LENDING GUIDANCE

Transcription

1 REVIEW OF PAYDAY LENDERS COMPLIANCE WITH THE IRRESPONSIBLE LENDING GUIDANCE QUESTIONNAIRE FOR CONSUMER REPRESENTATIVE ORGANISATIONS INCLUDING FREE ADVICE PROVIDERS Thank you for taking the time to complete this questionnaire. All who provide consumer credit are required under the Consumer Credit Act 1974 to be licensed by the Office of Fair Trading (OFT). In March 2010 (updated in February 2011) we issued the Irresponsible Lending Guidance setting out the standards expected of all licensees providing consumer credit. A copy of the OFT s Irresponsible Lending Guidance can be downloaded from the OFT s website at: paydaylenders. The OFT is conducting a review of the payday lending industry s compliance with the Irresponsible Lending Guidance. As part of the compliance review, the OFT is sending questionnaires to consumer representative organisations, including free advice providers and to licensed payday lenders, trade bodies and local authority trading standards services. The questions are intended to assist us in assessing compliance levels across the payday lending industry, identify the reasons for non compliance and use the findings to inform our future enforcement strategy. If you are content for the information disclosed in this form to be quoted in any future report please sign the consent form at the back of this document. If you run out of space while completing the questionnaire, please complete and attach extra sheets as necessary. A 'payday loan' is a short term, high interest, unsecured loan, expected to be repaid by the time/when the borrower receives his next regular income payment (normally on or around/within 30 days of having been granted the loan). References within the questionnaire to a payday lender or a payday lending business are references to licensees which offer these types of loans. References to you or your in the questionnaire are references to you as an individual adviser within your advice agency. However, if you are responding on behalf of an advice agency or organisation, references to you or your in the questionnaire are references to the advice agency or organisation. When responding to this questionnaire, please base your responses only on your actual knowledge and experience obtained through your recent dealings with clients. References in the questionnaire to rolling over a loan or rollovers are references to the situation where the duration of the credit is extended but the amount of the credit and the terms and conditions are unchanged. References to refinancing a loan are references to where additional credit is advanced or the terms and conditions are changed. If you have any questions about this survey please contact the OFT Irresponsible Lending Guidance Compliance Review Team ( questions.pdl@oft.gsi.gov.uk, telephone: ). 1

2 Please submit the completed questionnaire by to: by Friday, 18 May Alternatively you can complete and submit this form in writing to: Irresponsible Lending Guidance Compliance Review Team Office of Fair Trading FREEPOST KE6260 London EC4B 4AH Name Job Title Contact details of Advice Agency/ Organisation YOUR DETAILS address QUESTIONNAIRE SECTION ONE PAYDAY LENDING BUSINESS 1. Have you worked with clients who have taken out payday loans from a payday lender? 2. Have you had contact with payday lenders? 2

3 IF NO TO Q1 AND Q2, THANK YOU FOR LOOKING AT OUR QUESTIONNAIRE. YOU DO NOT HAVE TO COMPLETE THE REMAINING QUESTIONS. WE WOULD HOWEVER WELCOME ANY COMMENTS YOU HAVE ON THE BUSINESS PRACTICES WITHIN THE PAYDAY LENDING INDUSTRY OR ON THE OFT S IRRESPONSIBLE LENDING GUIDANCE. WE HAVE PROVIDED A SECTION AT THE END OF THE QUESTIONNAIRE FOR THIS PURPOSE. SECTION TWO AWARENESS 3. In March 2010 the OFT published its Irresponsible Lending Guidance. Are you aware of the Irresponsible Lending Guidance? IF NO GO TO Q12. ALL OTHERS GO TO Q4 4. Do you use the Irresponsible Lending Guidance? 5. Do you find the Irresponsible Lending Guidance clear and understandable? all of it some of it none of it 6. Has the Irresponsible Lending Guidance been useful in clarifying what the OFT would regard as unfair business practices? 3

4 7. Which parts of the Irresponsible Lending Guidance have you found useful? (Tick all that apply) General principles of fair business practice Explanations of credit agreements Assessment of affordability Pre contractual issues Contractual and post contractual issues Handling of default and arrears Regulatory compliance ne of the above 8. Based on your client cases, has the Irresponsible Lending Guidance raised standards across the payday lending industry? in all parts of the industry in some parts of the industry in no parts of the industry 9. Based on your client cases, are you aware of any unfair business practices that are not currently covered or are insufficiently covered by the Irresponsible Lending Guidance? If, please list the practices in question: 4

5 Please use the space below to expand on your answers to Q3 Q9. SECTION 3 IMPLEMENTATION AND MONITORING 10. Based on your client cases, are any parts of the Irresponsible Lending Guidance not being complied with by licensed payday lenders? General principles of fair business practice Explanations of credit agreements Assessment of affordability Pre contractual issues Contractual and post contractual issues Handling of default and arrears Regulatory compliance ne of the above 5

6 11. If you have used the Irresponsible Lending Guidance in discussions with payday lenders, what was the overall response to the guidance? response Positive response Negative response please expand t Applicable If negative, please use this space to expand on your answer: 12. Based on your client cases, how do payday lenders notify consumers of their entitlement to refer complaints to the Financial Ombudsman Service? (Tick all that apply) Stated on the front page of their website Stated elsewhere on their website Stated in the Pre contract Credit Information form In a leaflet or other document given to prospective customers As part of a pre contractual explanation Stated in the credit agreement Only after a complaint is made Do not make customers aware Other please specify 6

7 Please use the space below to expand on your answers to Q10 Q12. SECTION 4 BUSINESS PRACTICES 13. Based on your client cases, do payday lenders typically provide prospective borrowers with a Pre contract Credit Information form before an agreement is made? 14. Based on your client cases, please explain how payday lenders typically advise a prospective borrower that they can obtain further pre contract information and explanations. Are they allowed to take the Pre contract Credit Information form away? Are they given an opportunity to ask questions about the pre contract information and explanations? 7

8 15. Based on your client cases, do payday lenders typically provide prospective borrowers with an explanation of any of the following? Don t Know The total cost of the credit The total amount payable The period rate of interest The annualised rate of interest Any non interest charges The Annual Percentage Rate of Charge (APR) Any charges for non payment or late payment Any other fees or charges The consumer s right of withdrawal 8

9 Don t Know How and when the right of withdrawal may be exercised The consequences of failing to make payments under the agreement at the times required The risk of legal proceedings if payments are not made The cost of the debt growing if payments are not made The effect of extending the life of the credit agreement The effect of "rolling over" or refinancing the loan That payday loans are short term loan products That payday loans are unsuitable for longer term borrowing That payday loans are expensive relative to other forms of credit How to obtain further information about the credit agreement Other please specify 9

10 16. Based on your client cases, please explain how and when, payday lenders typically provide this explanation to prospective borrowers. (For example, with or after the Pre contract Credit Information form and given face to face, by telephone, by or online via the website.) 17. Based on your client cases, do payday lenders typically carry out credit reference checks of prospective borrowers? please expand 18. Based on your client cases, do payday lenders typically charge an administration fee or any other fee or charge for arranging a payday loan? 10

11 If, please provide details of the fee structure, what it covers and when it is payable (if known): 19. Based on your client cases, do payday lenders typically conduct affordability assessments? IF Q19 YES GO TO Q20 to Q22, ALL OTHERS GO TO Q Based on your client cases, how frequently do payday lenders typically conduct affordability assessments? Always Only in certain circumstances Do not routinely conduct assessments Other please specify 11

12 21. Based on your client cases, under what circumstance do payday lenders typically conduct affordability assessments? (Tick all that apply) For new customers For every new loan The first time a loan is rolled over Every time a loan is rolled over The first time a loan is refinanced Every time a loan is refinanced Other please specify 22. Based on your client cases, what are the processes or criteria typically used by payday lenders for assessing affordability? 12

13 23. Based on your client cases, please indicate the actions payday lenders typically take, if a consumer misses one or more repayments or does not pay the full amount on a payday loan: (Tick all that apply) Contact the consumer Send an arrears letter Send an arrears notice Send the OFT s arrears information sheet Send a default notice Send the OFT's default information sheet Freeze, reduce or suspend interest and/or charges on the loan Direct the consumer to a free debt advice provider Direct the consumer to a fee charging debt advice provider Re negotiate the repayment terms Offer to roll over the loan Offer to refinance the loan Deduct the outstanding money from the consumer's bank account Initiate a debt collection process Initiate legal proceedings Other please specify IF Q23 OFFER TO ROLL OVER THE LOAN OR OFFER TO REFINANCE THE LOAN GO TO Q24. ALL OTHERS GO TO Q Based on your client cases, what is the average number of roll overs or refinancings per borrower? 13

14 25. Based on your client cases, what typically is the average and maximum number of payday loans a consumer may have at any one time? Average: Maximum: Please use the space below to expand on your answers to Q13 Q25. 14

15 SECTION 5 PAYDAY LOANS 26. Based on the client cases you dealt with in 2011, what was the typical amount borrowed? 27. Based on your client cases, do payday lenders typically have absolute maximum and/or minimum loan amounts that consumers can borrow? Maximum Please specify the typical maximum amount Minimum Please specify the typical minimum amount 15

16 28. Based on the client cases you dealt with in 2011, what was the typical duration of the payday loans your clients had taken out? Less than a week 1 week 2 weeks 3 weeks 1 month 2 months More than 2 months Other please specify Please use the space below to expand on your answers to Q26 Q28. 16

17 SECTION 6 DATA PROTECTION 29. Has a client ever come to you with a complaint about a payday lender passing on their details to third parties? If yes, please provide details: 30. Has a client ever come to you with a complaint about being unable to opt out from having their details passed to third parties? If yes, please provide details: 17

18 Please use the space below to expand on your answers to Q29 & Q30. IN SUMMARY Please use the space below to provide any comments you have on the business practices within the payday lending industry or the OFT s Irresponsible Lending Guidance. 18

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20 Signed: Print name:. Date:. Thank you for taking the time to complete this questionnaire. If you have any queries please contact the Irresponsible Lending Guidance Compliance Review Team at or telephone: Please submit the questionnaire by to: Or write to: Irresponsible Lending Guidance Compliance Review Team Office of Fair Trading FREEPOST KE6260 London EC4B 4AH 20

21 Permission to disclose I give my consent to the OFT to use the information provided by me in the performance of any of its functions and to disclose that information to others where legally permissible. For example, the OFT may disclose such information in connection with enforcement of regulatory action under its own powers or may refer the information to another government department or enforcement authority. Signed:.. Print name: Position within your organisation: Date:.. 21