There has been focus placed on payday loans once again with Citizens Advice turning their attention to payday lenders and the impact that they have on vulnerable people. The organisation has branded payday loan companies irresponsible and they have deemed payday loans harmful for many people.

The study undertaken by Citizens Advice has revealed that some lenders were not carrying out the most basic of checks in ensuring that borrowers were in a position to pay off their bank loans. When you take on board the fact that payday loans can eventually come with very high rates of interest, this has to be seen as being very concerning.

Another thing that is very troubling is the suggestion that lenders were requesting internet banking login details and passwords from borrowers. This would provide lenders with the ability to directly control people’s bank accounts without having explicit or prior consent from the borrower. Even people who acknowledge the benefits that payday loans can offer would agree that this is a step too far. This is the sort of activity that results in people and organisations deeming payday loans harmful for many vulnerable people.

The survey asked 400 people about payday loans and a quarter of the respondents, 100 people, said that they had not been asked about their financial capabilities to pay off the loan. Even people who were experiencing financial difficulties, and who were checked, were allowed to take out a loan. There is supposed to be rules and regulations in place that ensures payday lenders will only provide money to people who are in a position to pay off the loan.

Are payday loans harmful for a lot of people?

It is fair to say that not all payday loan companies operate in this manner. There are many reputable and reliable payday loan firms who do carry out the checks and tests. However, if word starts to spread about the firms that don’t carry out the required checks or place people under scrutiny, it is likely that more people will flock towards these providers. This is human nature.

Even when people are in financial trouble, they will see a payday loan as a solution, or at least a short-term solution that pushes the problem further down the road. Too many people allow themselves to think like this and the unreliable payday lending companies take advantage of these people.

Not all payday loan companies or options are bad but you need to make sure that is right for you.