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Woman permitted to take out EIGHT payday loans at same time, This is Money

Published: 15:05 GMT, 6 March 2014 | Updated: 16:34 GMT, 6 March 2014

A woman with a history of debt problems has made a mockery of payday lenders’ affordability checks by taking out eight payday loans at once worth almost nine times her monthly disposable income.

In a stunt organised by guarantor lender Amigo Loans, its 23-year-old employee Lisa Kelly tested the nation’s largest payday lenders on their claims to have sturdy procedures in place to assess the affordability of their exorbitant short-term loans.

Lisa, who lives near Bournemouth, Hampshire, applied for credit from more than 40 payday firms over a three-day period in February, and was given loans of varying length totalling £2,340 from eight different lenders, meaning she would have had to repay £2,983.

Lenders: Lisa Kelly applies for payday loans as part of the stunt organised by Amigo Loans.

Half of the lenders who approved loans – including market-leaders Wonga, QuickQuid, Money Shop and My Jar – failed to ask about Lisa’s monthly expenditure, and had they done so, they would have realised she only has around £355 disposable income each month.

The two largest lenders, Wonga and QuickQuid, approved loans much higher than her disposable income, of £550 and £800 respectively.

Peachy, Mr Lender, Uncle Buck and Cash Access were among the lenders who rejected Lisa’s applications.

WHAT THE LENDERS ASKED

Wonga: £550 loan approved online. Asks for income details and confirmation that she could afford to repay, but no questions about expenditure or other payday loans.

QuickQuid: £800 loan approved online. Asks to read and accept T&Cs, and about pay frequency. No questions about monthly expenditure or other payday loans.

24/7 Money Box: £110 loan approved online. Attempted to get £200. Asked for employment and payday details and expenditure details. Not about other payday loans however.

Cash Genie: £300 loan approved online. Asked for income and expenditure details, not about other loans. Call followed asking for date of birth, starlet sign, phone number and bank details.

My Jar: £100 loan approved online. Asked about rental/mortgage cost, income and if she wields a car. Asked about how many other loans she has, but still approves even however told she had five other loans.

Mini Credit: £100 loan approved online. Asked for details of income and expenditure. Did not ask about other loans.

The Money Shop: £250 loan approved face to face. She was a previous customer so asked for debit card. Then printed out the details they had for her and asked if they were the same. Was asked if she had moved house. No questions about other loans or outgoings.

Speedy Cash: £130 approved face to face.. Asked about basic outgoings. No questions about other loans.

Credit reference agency Experian says that presently, lenders update information about the credit they grant on a monthly basis, so it can take up to a month before a payday loan emerges on a person’s credit record.

In spite of this, My Jar was the only one of the eight lenders who asked whether she had any payday loans outstanding – and STILL approved a £100 loan even tho’ she told them that at the time she had FIVE outstanding payday loans.

She said: ‘I was indeed shocked at how effortless the entire thing was, particularly with the larger companies. The speed at which the money ended up in my account was incredible.

‘I volunteered to do this research because I had practice of using payday loans and was shocked by their practices.

‘I only had to give basic information, the fattest lenders didn’t even ask me about my monthly outgoings.

‘The QuickQuid repayment alone would have left me with only £250 to meet all my monthly commitments; my rent alone is £600.’

Lisa conducted her explore by answering truthfully to any questions she was asked by lenders – such as her expenditure and whether she had existing loan debts.

The interest on the loans was paid by Amigo and a note has also been added to her credit file explaining the research so it does not adversely affect her credit rating.

She has first-hand practice of getting into trouble with payday lenders, taking out petite loans to get through to payday when she was Legitimate and Nineteen, but finding that she couldn’t get through to the next month’s payday without taking out another one.

She fully admits that she was bad at budgeting and only got out of debt with help from her family, and has been rejected for credit by mainstream lenders ever since.

Having previously taken out loans with Wonga, QuickQuid, and The Money Shop, their approvals were partly based on her good record of borrowing with them, but the ease at which she was able to get credit that totalled almost dual her £1,250-a-month wage packet is a cause for serious concern.

In some cases she was not able to borrow the utter amount she had applied for, with 24/7 Money Box and The Money Shop both providing her less than money than she’d asked for.

What’s particularly concerning about Lisa not being asked for details of her expenditure is that much of the information about her outgoings would not be found on her credit report, which payday lenders uses as part of their affordability assessments.

Borrowing: Lisa was able to borrow £2,340 even however her monthly income is just £1,250.

As she has a poor credit rating already, her bf has taken out their mortgage in his name and the same goes for all their utility bills, so the £600 she spends a month on these expenses wouldn’t show up when checked by lenders.

The only regular expenses that would have shown up on her credit report was the £100-a-month she spends paying off her credit and store cards, and the £43-a-month contract she has with her mobile phone provider.

James Jones, of Experian, said: ‘Credit reports do not demonstrate how much disposable income someone has. They do showcase any regular payments being made to other credit agreements. This gives them a view of a person’s expenditure based on their current borrowing.

‘For things like water and energy, if you pay by direct debit you won’t see a balance unless you get into arrears. On loans and mortgages it will always demonstrate the current balance and regular payment amount.

‘For cards it will demonstrate the current balance, last statement balance and the last payment amount.’

Questions: Wonga failed to ask for information about Lisa Kelly’s monthly outgoings.

The Money Shop claimed that it is the responsibility of customers to inform them of any switches in their circumstances, as stated in the petite print on their contract, and that Lisa had failed to do this by not disclosing she had taken out several payday loans as part of her research by the time she applied for her 2nd Money Shop loan.

However, Lisa said that the staff member at The Money Shop she went to told her that as long as her address was the same and her contact details were the same, then they didn’t need to know anything else.

It is hoped that the introduction of real-time information sharing services being launched by credit reference agencies later this year will stop the problem of people being able to take out numerous payday loans at once, as lenders should be able to update information about their customers instantaneously.

A spokesman for the Consumer Finance Association, the trade bod for several payday lenders, said: ‘CFA members do the same checks as credit cards, store cards and motor finance, but as with those products, we can’t stop people making numerous applications.

‘Real-time data sharing solutions are already being developed, because responsible lenders want as much information as possible to help them make their lending decisions.

‘Real-time data will enable them to make more informed lending decisions. It will give lenders an up to date snapshot of customers’ current financial circumstances provided it captures all types of consumer credit.’

Shock: Lisa said she was amazed she’d been permitted to take out so much credit.

From next month too the FCA will enforce rules that mean lenders have to give mandatory affordability checks, presumably of a better quality than the ones suggested to Lisa Kelly by the eight lenders in question, albeit they remained adamant their processes are sturdy.

QuickQuid said: ‘We reinforce that our lending assessments take into consideration a multitude of factors from verified third-party sources such as Callcredit and other vendors as well as customer history (if any) and circumstances.

‘QuickQuid has been among the very first to sign up to Callcredit’s fresh real-time data sharing initiative. This fresh data-sharing initiative can provide lenders with information relating to fresh accounts, closed accounts, extensions to credit, rollovers and switches to payment terms, together with details of whether payments are received as expected.

‘This initiative will ensure that lenders are working to the most accurate and up-to-date view of consumers’ circumstances when assessing lending requests.’

A spokesman for Wonga said: ‘We use thousands of lumps of data – including from the credit bureaux – each time someone applies for a loan to ensure they can afford to repay. As a result, we reject 80 per cent of very first loan applications.

‘We have been closely involved with the development of real-time data sharing and will be adopting it as part of our loan-decision making process when it launches. We welcome any initiative that helps give a more accurate and up-to-date picture of an individual’s financial position to help ensure an industry-wide responsible treatment to lending.’

The other lenders named had not provided a comment by the time of publication.

WORTHY Investigate – BUT TAKE AMIGO’S INVOLVEMENT WITH A PINCH OF SALT

Adam Uren, of This is Money, says: To coincide with the release of this research, Amigo has sent letters to the Government and FCA calling for activity on the affordability checks carried out by lenders.

It’s a strange time to do it, given that the fresh FCA rules actually come into force from next month that will bring in compulsory affordability checks.

This should be further improved by the introduction of real-time information sharing later this year, which should mean lenders don’t have to wait a month before they can see if a customer has taken out other payday loans recently.

The research Lisa has carried out is worthy, of that there’s no doubt, but Amigo has a vested interest in marginalising the payday loan industry while extolling the virtues of its guarantor loans.

While these loans come with a more sturdy affordability checking system than those employed by some payday lenders, at 49.9 per cent APR on its longer-term lending they are still extraordinarily expensive and hardly the hallmark of a benevolent lender – albeit their target market is those who can’t get credit from mainstream lenders.

Payday lenders don’t need any help from firms like Amigo to prove they are unsavoury, or that their affordability checks leave a lot to be desired, in spite of their regular claims they reject more applicants than they approve.

The suggestion that customers need to tell lenders if their circumstances have switched, like having other payday loans, doesn’t wash with me.

People desperate for cash are liable to arch the truth and even fair customers – like Lisa – are unlikely to volunteer the information without prompting – and I don’t consider mentioning it in contractual small-print a ‘prompt’.

We can only hope that upcoming real-time reporting and stricter FCA guidelines will have the desired effect in preventing people falling into irrevocable levels of debt in a brief space of time.

Woman permitted to take out EIGHT payday loans at same time, This is Money

Published: 15:05 GMT, 6 March 2014 | Updated: 16:34 GMT, 6 March 2014

A woman with a history of debt problems has made a mockery of payday lenders’ affordability checks by taking out eight payday loans at once worth almost nine times her monthly disposable income.

In a stunt organised by guarantor lender Amigo Loans, its 23-year-old employee Lisa Kelly tested the nation’s largest payday lenders on their claims to have sturdy procedures in place to assess the affordability of their exorbitant short-term loans.

Lisa, who lives near Bournemouth, Hampshire, applied for credit from more than 40 payday firms over a three-day period in February, and was given loans of varying length totalling £2,340 from eight different lenders, meaning she would have had to repay £2,983.

Lenders: Lisa Kelly applies for payday loans as part of the stunt organised by Amigo Loans.

Half of the lenders who approved loans – including market-leaders Wonga, QuickQuid, Money Shop and My Jar – failed to ask about Lisa’s monthly expenditure, and had they done so, they would have realised she only has around £355 disposable income each month.

The two thickest lenders, Wonga and QuickQuid, approved loans much higher than her disposable income, of £550 and £800 respectively.

Peachy, Mr Lender, Uncle Buck and Cash Access were among the lenders who rejected Lisa’s applications.

WHAT THE LENDERS ASKED

Wonga: £550 loan approved online. Asks for income details and confirmation that she could afford to repay, but no questions about expenditure or other payday loans.

QuickQuid: £800 loan approved online. Asks to read and accept T&Cs, and about pay frequency. No questions about monthly expenditure or other payday loans.

24/7 Money Box: £110 loan approved online. Attempted to get £200. Asked for employment and payday details and expenditure details. Not about other payday loans however.

Cash Genie: £300 loan approved online. Asked for income and expenditure details, not about other loans. Call followed asking for date of birth, starlet sign, phone number and bank details.

My Jar: £100 loan approved online. Asked about rental/mortgage cost, income and if she possesses a car. Asked about how many other loans she has, but still approves even tho’ told she had five other loans.

Mini Credit: £100 loan approved online. Asked for details of income and expenditure. Did not ask about other loans.

The Money Shop: £250 loan approved face to face. She was a previous customer so asked for debit card. Then printed out the details they had for her and asked if they were the same. Was asked if she had moved house. No questions about other loans or outgoings.

Speedy Cash: £130 approved face to face.. Asked about basic outgoings. No questions about other loans.

Credit reference agency Experian says that presently, lenders update information about the credit they grant on a monthly basis, so it can take up to a month before a payday loan shows up on a person’s credit record.

In spite of this, My Jar was the only one of the eight lenders who asked whether she had any payday loans outstanding – and STILL approved a £100 loan even tho’ she told them that at the time she had FIVE outstanding payday loans.

She said: ‘I was truly shocked at how effortless the entire thing was, particularly with the larger companies. The speed at which the money ended up in my account was incredible.

‘I volunteered to do this research because I had practice of using payday loans and was shocked by their practices.

‘I only had to give basic information, the fattest lenders didn’t even ask me about my monthly outgoings.

‘The QuickQuid repayment alone would have left me with only £250 to meet all my monthly commitments; my rent alone is £600.’

Lisa conducted her explore by answering truthfully to any questions she was asked by lenders – such as her expenditure and whether she had existing loan debts.

The interest on the loans was paid by Amigo and a note has also been added to her credit file explaining the research so it does not adversely affect her credit rating.

She has first-hand practice of getting into trouble with payday lenders, taking out petite loans to get through to payday when she was Eighteen and Nineteen, but finding that she couldn’t get through to the next month’s payday without taking out another one.

She fully admits that she was bad at budgeting and only got out of debt with help from her family, and has been rejected for credit by mainstream lenders ever since.

Having previously taken out loans with Wonga, QuickQuid, and The Money Shop, their approvals were partly based on her good record of borrowing with them, but the ease at which she was able to get credit that totalled almost dual her £1,250-a-month wage packet is a cause for serious concern.

In some cases she was not able to borrow the utter amount she had applied for, with 24/7 Money Box and The Money Shop both providing her less than money than she’d asked for.

What’s particularly concerning about Lisa not being asked for details of her expenditure is that much of the information about her outgoings would not be found on her credit report, which payday lenders uses as part of their affordability assessments.

Borrowing: Lisa was able to borrow £2,340 even however her monthly income is just £1,250.

As she has a poor credit rating already, her bf has taken out their mortgage in his name and the same goes for all their utility bills, so the £600 she spends a month on these expenses wouldn’t emerge when checked by lenders.

The only regular expenses that would have shown up on her credit report was the £100-a-month she spends paying off her credit and store cards, and the £43-a-month contract she has with her mobile phone provider.

James Jones, of Experian, said: ‘Credit reports do not demonstrate how much disposable income someone has. They do display any regular payments being made to other credit agreements. This gives them a view of a person’s expenditure based on their current borrowing.

‘For things like water and energy, if you pay by direct debit you won’t see a balance unless you get into arrears. On loans and mortgages it will always demonstrate the current balance and regular payment amount.

‘For cards it will showcase the current balance, last statement balance and the last payment amount.’

Questions: Wonga failed to ask for information about Lisa Kelly’s monthly outgoings.

The Money Shop claimed that it is the responsibility of customers to inform them of any switches in their circumstances, as stated in the petite print on their contract, and that Lisa had failed to do this by not disclosing she had taken out several payday loans as part of her research by the time she applied for her 2nd Money Shop loan.

However, Lisa said that the staff member at The Money Shop she went to told her that as long as her address was the same and her contact details were the same, then they didn’t need to know anything else.

It is hoped that the introduction of real-time information sharing services being launched by credit reference agencies later this year will stop the problem of people being able to take out numerous payday loans at once, as lenders should be able to update information about their customers instantly.

A spokesman for the Consumer Finance Association, the trade assets for several payday lenders, said: ‘CFA members do the same checks as credit cards, store cards and motor finance, but as with those products, we can’t stop people making numerous applications.

‘Real-time data sharing solutions are already being developed, because responsible lenders want as much information as possible to help them make their lending decisions.

‘Real-time data will enable them to make more informed lending decisions. It will give lenders an up to date snapshot of customers’ current financial circumstances provided it captures all types of consumer credit.’

Shock: Lisa said she was amazed she’d been permitted to take out so much credit.

From next month too the FCA will enforce rules that mean lenders have to give mandatory affordability checks, presumably of a better quality than the ones suggested to Lisa Kelly by the eight lenders in question, albeit they remained adamant their processes are sturdy.

QuickQuid said: ‘We reinforce that our lending assessments take into consideration a diversity of factors from verified third-party sources such as Callcredit and other vendors as well as customer history (if any) and circumstances.

‘QuickQuid has been among the very first to sign up to Callcredit’s fresh real-time data sharing initiative. This fresh data-sharing initiative can provide lenders with information relating to fresh accounts, closed accounts, extensions to credit, rollovers and switches to payment terms, together with details of whether payments are received as expected.

‘This initiative will ensure that lenders are working to the most accurate and up-to-date view of consumers’ circumstances when assessing lending requests.’

A spokesman for Wonga said: ‘We use thousands of chunks of data – including from the credit bureaux – each time someone applies for a loan to ensure they can afford to repay. As a result, we reject 80 per cent of very first loan applications.

‘We have been closely involved with the development of real-time data sharing and will be adopting it as part of our loan-decision making process when it launches. We welcome any initiative that helps give a more accurate and up-to-date picture of an individual’s financial position to help ensure an industry-wide responsible treatment to lending.’

The other lenders named had not provided a comment by the time of publication.

WORTHY Explore – BUT TAKE AMIGO’S INVOLVEMENT WITH A PINCH OF SALT

Adam Uren, of This is Money, says: To coincide with the release of this research, Amigo has sent letters to the Government and FCA calling for act on the affordability checks carried out by lenders.

It’s a strange time to do it, given that the fresh FCA rules actually come into force from next month that will bring in compulsory affordability checks.

This should be further improved by the introduction of real-time information sharing later this year, which should mean lenders don’t have to wait a month before they can see if a customer has taken out other payday loans recently.

The research Lisa has carried out is worthy, of that there’s no doubt, but Amigo has a vested interest in marginalising the payday loan industry while extolling the virtues of its guarantor loans.

While these loans come with a more sturdy affordability checking system than those employed by some payday lenders, at 49.9 per cent APR on its longer-term lending they are still extraordinarily expensive and hardly the hallmark of a benevolent lender – albeit their target market is those who can’t get credit from mainstream lenders.

Payday lenders don’t need any help from firms like Amigo to prove they are unsavoury, or that their affordability checks leave a lot to be desired, in spite of their regular claims they reject more applicants than they approve.

The suggestion that customers need to tell lenders if their circumstances have switched, like having other payday loans, doesn’t wash with me.

People desperate for cash are liable to arch the truth and even fair customers – like Lisa – are unlikely to volunteer the information without prompting – and I don’t consider mentioning it in contractual small-print a ‘prompt’.

We can only hope that upcoming real-time reporting and stricter FCA guidelines will have the desired effect in preventing people falling into irrevocable levels of debt in a brief space of time.

Woman permitted to take out EIGHT payday loans at same time, This is Money

Published: 15:05 GMT, 6 March 2014 | Updated: 16:34 GMT, 6 March 2014

A woman with a history of debt problems has made a mockery of payday lenders’ affordability checks by taking out eight payday loans at once worth almost nine times her monthly disposable income.

In a stunt organised by guarantor lender Amigo Loans, its 23-year-old employee Lisa Kelly tested the nation’s fattest payday lenders on their claims to have sturdy procedures in place to assess the affordability of their exorbitant short-term loans.

Lisa, who lives near Bournemouth, Hampshire, applied for credit from more than 40 payday firms over a three-day period in February, and was given loans of varying length totalling £2,340 from eight different lenders, meaning she would have had to repay £2,983.

Lenders: Lisa Kelly applies for payday loans as part of the stunt organised by Amigo Loans.

Half of the lenders who approved loans – including market-leaders Wonga, QuickQuid, Money Shop and My Jar – failed to ask about Lisa’s monthly expenditure, and had they done so, they would have realised she only has around £355 disposable income each month.

The two fattest lenders, Wonga and QuickQuid, approved loans much higher than her disposable income, of £550 and £800 respectively.

Peachy, Mr Lender, Uncle Buck and Cash Access were among the lenders who rejected Lisa’s applications.

WHAT THE LENDERS ASKED

Wonga: £550 loan approved online. Asks for income details and confirmation that she could afford to repay, but no questions about expenditure or other payday loans.

QuickQuid: £800 loan approved online. Asks to read and accept T&Cs, and about pay frequency. No questions about monthly expenditure or other payday loans.

24/7 Money Box: £110 loan approved online. Attempted to get £200. Asked for employment and payday details and expenditure details. Not about other payday loans however.

Cash Genie: £300 loan approved online. Asked for income and expenditure details, not about other loans. Call followed asking for date of birth, starlet sign, phone number and bank details.

My Jar: £100 loan approved online. Asked about rental/mortgage cost, income and if she wields a car. Asked about how many other loans she has, but still approves even however told she had five other loans.

Mini Credit: £100 loan approved online. Asked for details of income and expenditure. Did not ask about other loans.

The Money Shop: £250 loan approved face to face. She was a previous customer so asked for debit card. Then printed out the details they had for her and asked if they were the same. Was asked if she had moved house. No questions about other loans or outgoings.

Speedy Cash: £130 approved face to face.. Asked about basic outgoings. No questions about other loans.

Credit reference agency Experian says that presently, lenders update information about the credit they grant on a monthly basis, so it can take up to a month before a payday loan shows up on a person’s credit record.

In spite of this, My Jar was the only one of the eight lenders who asked whether she had any payday loans outstanding – and STILL approved a £100 loan even however she told them that at the time she had FIVE outstanding payday loans.

She said: ‘I was truly shocked at how effortless the entire thing was, particularly with the larger companies. The speed at which the money ended up in my account was incredible.

‘I volunteered to do this research because I had practice of using payday loans and was shocked by their practices.

‘I only had to give basic information, the fattest lenders didn’t even ask me about my monthly outgoings.

‘The QuickQuid repayment alone would have left me with only £250 to meet all my monthly commitments; my rent alone is £600.’

Lisa conducted her investigate by answering truthfully to any questions she was asked by lenders – such as her expenditure and whether she had existing loan debts.

The interest on the loans was paid by Amigo and a note has also been added to her credit file explaining the research so it does not adversely affect her credit rating.

She has first-hand practice of getting into trouble with payday lenders, taking out petite loans to get through to payday when she was Legitimate and Nineteen, but finding that she couldn’t get through to the next month’s payday without taking out another one.

She fully admits that she was bad at budgeting and only got out of debt with help from her family, and has been rejected for credit by mainstream lenders ever since.

Having previously taken out loans with Wonga, QuickQuid, and The Money Shop, their approvals were partly based on her good record of borrowing with them, but the ease at which she was able to get credit that totalled almost dual her £1,250-a-month wage packet is a cause for serious concern.

In some cases she was not able to borrow the total amount she had applied for, with 24/7 Money Box and The Money Shop both providing her less than money than she’d asked for.

What’s particularly concerning about Lisa not being asked for details of her expenditure is that much of the information about her outgoings would not be found on her credit report, which payday lenders uses as part of their affordability assessments.

Borrowing: Lisa was able to borrow £2,340 even however her monthly income is just £1,250.

As she has a poor credit rating already, her bf has taken out their mortgage in his name and the same goes for all their utility bills, so the £600 she spends a month on these expenses wouldn’t show up when checked by lenders.

The only regular expenses that would have shown up on her credit report was the £100-a-month she spends paying off her credit and store cards, and the £43-a-month contract she has with her mobile phone provider.

James Jones, of Experian, said: ‘Credit reports do not display how much disposable income someone has. They do display any regular payments being made to other credit agreements. This gives them a view of a person’s expenditure based on their current borrowing.

‘For things like water and energy, if you pay by direct debit you won’t see a balance unless you get into arrears. On loans and mortgages it will always demonstrate the current balance and regular payment amount.

‘For cards it will showcase the current balance, last statement balance and the last payment amount.’

Questions: Wonga failed to ask for information about Lisa Kelly’s monthly outgoings.

The Money Shop claimed that it is the responsibility of customers to inform them of any switches in their circumstances, as stated in the petite print on their contract, and that Lisa had failed to do this by not disclosing she had taken out several payday loans as part of her research by the time she applied for her 2nd Money Shop loan.

However, Lisa said that the staff member at The Money Shop she went to told her that as long as her address was the same and her contact details were the same, then they didn’t need to know anything else.

It is hoped that the introduction of real-time information sharing services being launched by credit reference agencies later this year will stop the problem of people being able to take out numerous payday loans at once, as lenders should be able to update information about their customers instantly.

A spokesman for the Consumer Finance Association, the trade bod for several payday lenders, said: ‘CFA members do the same checks as credit cards, store cards and motor finance, but as with those products, we can’t stop people making numerous applications.

‘Real-time data sharing solutions are already being developed, because responsible lenders want as much information as possible to help them make their lending decisions.

‘Real-time data will enable them to make more informed lending decisions. It will give lenders an up to date snapshot of customers’ current financial circumstances provided it captures all types of consumer credit.’

Shock: Lisa said she was amazed she’d been permitted to take out so much credit.

From next month too the FCA will enforce rules that mean lenders have to give mandatory affordability checks, presumably of a better quality than the ones suggested to Lisa Kelly by the eight lenders in question, albeit they remained adamant their processes are sturdy.

QuickQuid said: ‘We reinforce that our lending assessments take into consideration a multiplicity of factors from verified third-party sources such as Callcredit and other vendors as well as customer history (if any) and circumstances.

‘QuickQuid has been among the very first to sign up to Callcredit’s fresh real-time data sharing initiative. This fresh data-sharing initiative can provide lenders with information relating to fresh accounts, closed accounts, extensions to credit, rollovers and switches to payment terms, together with details of whether payments are received as expected.

‘This initiative will ensure that lenders are working to the most accurate and up-to-date view of consumers’ circumstances when assessing lending requests.’

A spokesman for Wonga said: ‘We use thousands of chunks of data – including from the credit bureaux – each time someone applies for a loan to ensure they can afford to repay. As a result, we reject 80 per cent of very first loan applications.

‘We have been closely involved with the development of real-time data sharing and will be adopting it as part of our loan-decision making process when it launches. We welcome any initiative that helps give a more accurate and up-to-date picture of an individual’s financial position to help ensure an industry-wide responsible treatment to lending.’

The other lenders named had not provided a comment by the time of publication.

WORTHY Examine – BUT TAKE AMIGO’S INVOLVEMENT WITH A PINCH OF SALT

Adam Uren, of This is Money, says: To coincide with the release of this research, Amigo has sent letters to the Government and FCA calling for act on the affordability checks carried out by lenders.

It’s a strange time to do it, given that the fresh FCA rules actually come into force from next month that will bring in compulsory affordability checks.

This should be further improved by the introduction of real-time information sharing later this year, which should mean lenders don’t have to wait a month before they can see if a customer has taken out other payday loans recently.

The research Lisa has carried out is worthy, of that there’s no doubt, but Amigo has a vested interest in marginalising the payday loan industry while extolling the virtues of its guarantor loans.

While these loans come with a more sturdy affordability checking system than those employed by some payday lenders, at 49.9 per cent APR on its longer-term lending they are still extraordinarily expensive and hardly the hallmark of a benevolent lender – albeit their target market is those who can’t get credit from mainstream lenders.

Payday lenders don’t need any help from firms like Amigo to prove they are unsavoury, or that their affordability checks leave a lot to be desired, in spite of their regular claims they reject more applicants than they approve.

The suggestion that customers need to tell lenders if their circumstances have switched, like having other payday loans, doesn’t wash with me.

People desperate for cash are liable to arch the truth and even fair customers – like Lisa – are unlikely to volunteer the information without prompting – and I don’t consider mentioning it in contractual small-print a ‘prompt’.

We can only hope that upcoming real-time reporting and stricter FCA guidelines will have the desired effect in preventing people falling into irrevocable levels of debt in a brief space of time.

Woman permitted to take out EIGHT payday loans at same time, This is Money

Published: 15:05 GMT, 6 March 2014 | Updated: 16:34 GMT, 6 March 2014

A woman with a history of debt problems has made a mockery of payday lenders’ affordability checks by taking out eight payday loans at once worth almost nine times her monthly disposable income.

In a stunt organised by guarantor lender Amigo Loans, its 23-year-old employee Lisa Kelly tested the nation’s thickest payday lenders on their claims to have sturdy procedures in place to assess the affordability of their exorbitant short-term loans.

Lisa, who lives near Bournemouth, Hampshire, applied for credit from more than 40 payday firms over a three-day period in February, and was given loans of varying length totalling £2,340 from eight different lenders, meaning she would have had to repay £2,983.

Lenders: Lisa Kelly applies for payday loans as part of the stunt organised by Amigo Loans.

Half of the lenders who approved loans – including market-leaders Wonga, QuickQuid, Money Shop and My Jar – failed to ask about Lisa’s monthly expenditure, and had they done so, they would have realised she only has around £355 disposable income each month.

The two thickest lenders, Wonga and QuickQuid, approved loans much higher than her disposable income, of £550 and £800 respectively.

Peachy, Mr Lender, Uncle Buck and Cash Access were among the lenders who rejected Lisa’s applications.

WHAT THE LENDERS ASKED

Wonga: £550 loan approved online. Asks for income details and confirmation that she could afford to repay, but no questions about expenditure or other payday loans.

QuickQuid: £800 loan approved online. Asks to read and accept T&Cs, and about pay frequency. No questions about monthly expenditure or other payday loans.

24/7 Money Box: £110 loan approved online. Attempted to get £200. Asked for employment and payday details and expenditure details. Not about other payday loans however.

Cash Genie: £300 loan approved online. Asked for income and expenditure details, not about other loans. Call followed asking for date of birth, starlet sign, phone number and bank details.

My Jar: £100 loan approved online. Asked about rental/mortgage cost, income and if she wields a car. Asked about how many other loans she has, but still approves even tho’ told she had five other loans.

Mini Credit: £100 loan approved online. Asked for details of income and expenditure. Did not ask about other loans.

The Money Shop: £250 loan approved face to face. She was a previous customer so asked for debit card. Then printed out the details they had for her and asked if they were the same. Was asked if she had moved house. No questions about other loans or outgoings.

Speedy Cash: £130 approved face to face.. Asked about basic outgoings. No questions about other loans.

Credit reference agency Experian says that presently, lenders update information about the credit they grant on a monthly basis, so it can take up to a month before a payday loan emerges on a person’s credit record.

In spite of this, My Jar was the only one of the eight lenders who asked whether she had any payday loans outstanding – and STILL approved a £100 loan even however she told them that at the time she had FIVE outstanding payday loans.

She said: ‘I was indeed shocked at how effortless the entire thing was, particularly with the larger companies. The speed at which the money ended up in my account was incredible.

‘I volunteered to do this research because I had practice of using payday loans and was shocked by their practices.

‘I only had to give basic information, the fattest lenders didn’t even ask me about my monthly outgoings.

‘The QuickQuid repayment alone would have left me with only £250 to meet all my monthly commitments; my rent alone is £600.’

Lisa conducted her probe by answering truthfully to any questions she was asked by lenders – such as her expenditure and whether she had existing loan debts.

The interest on the loans was paid by Amigo and a note has also been added to her credit file explaining the research so it does not adversely affect her credit rating.

She has first-hand practice of getting into trouble with payday lenders, taking out puny loans to get through to payday when she was Eighteen and Nineteen, but finding that she couldn’t get through to the next month’s payday without taking out another one.

She fully admits that she was bad at budgeting and only got out of debt with help from her family, and has been rejected for credit by mainstream lenders ever since.

Having previously taken out loans with Wonga, QuickQuid, and The Money Shop, their approvals were partly based on her good record of borrowing with them, but the ease at which she was able to get credit that totalled almost dual her £1,250-a-month wage packet is a cause for serious concern.

In some cases she was not able to borrow the total amount she had applied for, with 24/7 Money Box and The Money Shop both providing her less than money than she’d asked for.

What’s particularly concerning about Lisa not being asked for details of her expenditure is that much of the information about her outgoings would not be found on her credit report, which payday lenders uses as part of their affordability assessments.

Borrowing: Lisa was able to borrow £2,340 even tho’ her monthly income is just £1,250.

As she has a poor credit rating already, her beau has taken out their mortgage in his name and the same goes for all their utility bills, so the £600 she spends a month on these expenses wouldn’t show up when checked by lenders.

The only regular expenses that would have shown up on her credit report was the £100-a-month she spends paying off her credit and store cards, and the £43-a-month contract she has with her mobile phone provider.

James Jones, of Experian, said: ‘Credit reports do not display how much disposable income someone has. They do display any regular payments being made to other credit agreements. This gives them a view of a person’s expenditure based on their current borrowing.

‘For things like water and energy, if you pay by direct debit you won’t see a balance unless you get into arrears. On loans and mortgages it will always showcase the current balance and regular payment amount.

‘For cards it will showcase the current balance, last statement balance and the last payment amount.’

Questions: Wonga failed to ask for information about Lisa Kelly’s monthly outgoings.

The Money Shop claimed that it is the responsibility of customers to inform them of any switches in their circumstances, as stated in the petite print on their contract, and that Lisa had failed to do this by not disclosing she had taken out several payday loans as part of her research by the time she applied for her 2nd Money Shop loan.

However, Lisa said that the staff member at The Money Shop she went to told her that as long as her address was the same and her contact details were the same, then they didn’t need to know anything else.

It is hoped that the introduction of real-time information sharing services being launched by credit reference agencies later this year will stop the problem of people being able to take out numerous payday loans at once, as lenders should be able to update information about their customers instantaneously.

A spokesman for the Consumer Finance Association, the trade assets for several payday lenders, said: ‘CFA members do the same checks as credit cards, store cards and motor finance, but as with those products, we can’t stop people making numerous applications.

‘Real-time data sharing solutions are already being developed, because responsible lenders want as much information as possible to help them make their lending decisions.

‘Real-time data will enable them to make more informed lending decisions. It will give lenders an up to date snapshot of customers’ current financial circumstances provided it captures all types of consumer credit.’

Shock: Lisa said she was amazed she’d been permitted to take out so much credit.

From next month too the FCA will enforce rules that mean lenders have to give mandatory affordability checks, presumably of a better quality than the ones suggested to Lisa Kelly by the eight lenders in question, albeit they remained adamant their processes are sturdy.

QuickQuid said: ‘We reinforce that our lending assessments take into consideration a diversity of factors from verified third-party sources such as Callcredit and other vendors as well as customer history (if any) and circumstances.

‘QuickQuid has been among the very first to sign up to Callcredit’s fresh real-time data sharing initiative. This fresh data-sharing initiative can provide lenders with information relating to fresh accounts, closed accounts, extensions to credit, rollovers and switches to payment terms, together with details of whether payments are received as expected.

‘This initiative will ensure that lenders are working to the most accurate and up-to-date view of consumers’ circumstances when assessing lending requests.’

A spokesman for Wonga said: ‘We use thousands of chunks of data – including from the credit bureaux – each time someone applies for a loan to ensure they can afford to repay. As a result, we reject 80 per cent of very first loan applications.

‘We have been closely involved with the development of real-time data sharing and will be adopting it as part of our loan-decision making process when it launches. We welcome any initiative that helps give a more accurate and up-to-date picture of an individual’s financial position to help ensure an industry-wide responsible treatment to lending.’

The other lenders named had not provided a comment by the time of publication.

WORTHY Examine – BUT TAKE AMIGO’S INVOLVEMENT WITH A PINCH OF SALT

Adam Uren, of This is Money, says: To coincide with the release of this research, Amigo has sent letters to the Government and FCA calling for act on the affordability checks carried out by lenders.

It’s a strange time to do it, given that the fresh FCA rules actually come into force from next month that will bring in compulsory affordability checks.

This should be further improved by the introduction of real-time information sharing later this year, which should mean lenders don’t have to wait a month before they can see if a customer has taken out other payday loans recently.

The research Lisa has carried out is worthy, of that there’s no doubt, but Amigo has a vested interest in marginalising the payday loan industry while extolling the virtues of its guarantor loans.

While these loans come with a more sturdy affordability checking system than those employed by some payday lenders, at 49.9 per cent APR on its longer-term lending they are still extraordinarily expensive and hardly the hallmark of a benevolent lender – albeit their target market is those who can’t get credit from mainstream lenders.

Payday lenders don’t need any help from firms like Amigo to prove they are unsavoury, or that their affordability checks leave a lot to be desired, in spite of their regular claims they reject more applicants than they approve.

The suggestion that customers need to tell lenders if their circumstances have switched, like having other payday loans, doesn’t wash with me.

People desperate for cash are liable to arch the truth and even fair customers – like Lisa – are unlikely to volunteer the information without prompting – and I don’t consider mentioning it in contractual small-print a ‘prompt’.

We can only hope that upcoming real-time reporting and stricter FCA guidelines will have the desired effect in preventing people falling into irrevocable levels of debt in a brief space of time.

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