Payday loans are 'misunderstood'.
A survey by the Consumer Finance Association says 93% of customers think payday lenders treat them with dignity and respect. But looking at the sample shows a flawed process. It doesn't matter if you are charged hundreds – or even thousands – of per cent in interest for a short-term loan, provided you are treated with dignity and respect, according to a survey by the Consumer Finance Association.
The CFA, a trade association which includes several payday lenders among its members, claims that "one of the largest ever pieces of research into the payday loan industry, conducted by international research agency YouGov, has revealed a massive gulf in attitudes between payday loan customers and politicians", and shows that payday loans can be "misunderstood".
The survey found that 93% of payday loan company customers think payday lenders treat them with dignity and respect, whereas only 5% of policymakers think they do so. And 89% of customers think payday lenders explain their charges and fees clearly, whereas only 12% of policymakers think they do.
This is not surprising: payday lenders always claim their customers are highly satisfied with their service and have long complained that their most vehement critics are affluent people who are unlikely ever to be hard up and therefore have never taken out a payday loan.
But the research loses all credibility when you look at how it was conducted. YouGov was careful to question a variety of policymakers, including 100 MPs, 100 lords, 100 councillors and members from the devolved assemblies, with weightings according to the party, gender and, in the case of MPs, year of joining.
But the 300 payday loan users it questioned were all customers of just one company, The Money Shop. There are about 200 payday lenders operating in the UK – why not spread the sample a bit? Why no Wonga clients, for example – by far the highest profile high-cost lender – or QuickQuid or Peachy?
The Money Shop is one of the biggest and more reputable high-cost loan companies, so it's perhaps not surprising the customers reported reasonable treatment.
Had the sample been extended to the former customers of Yes Loans, which lost its credit licence earlier this month after an Office of Fair Trading investigation into customer complaints, the results of the survey would no doubt have been rather different.
A spokesman for the CFA said it provided YouGov with the contact details of 3,600 Money Shop customers, from which 300 were randomly selected. It chose the Money Shop because it was a big company with a nationwide profile.
But that hardly makes the research representative of the payday loan industry as a whole, which is how the CFA presented its survey. Not did it ask the questions we'd like to know the answers to, including:
• did customers try borrowing from a more mainstream, cheaper lender before opting for a payday lender?
• how do they feel about paying a huge amount of interest?
• and if they failed to repay the loan, what happened?
We are all for customers being treated politely and with respect. But we also think they should be treated fairly, and not targeted with expensive loans that are going to leave them even worse off than before.