The Chartered Accountants’ Benevolent Association (CABA) reports that a small but growing number of ICAEW members and their families appear to be getting into financial difficulties by taking out payday loans
The charity says some of these accountants are in low-income situations and have used a payday lender as a last resort but others are in six-figure salary jobs.
Paul Day, CABA debt support officer, said: ‘We have seen a small but diverse range of cases in the last few months and more seem to be emerging. They have few shared characteristics – some are students while others have been pensioners, and some are in well-paid jobs while others have almost nothing.’
‘However, the one common factor is that the interest rates charged by these lenders is very high. If just a few payments are missed, the balance of the loan escalates at an astonishing rate. People can find themselves getting into financial difficulties very quickly.’
In these situations, CABA has normally approached the lender on behalf of the client and attempted to negotiate a new loan arrangement but, in some cases, has also provided some financial assistance with household expenses.
Day said: ‘Following the recent Wonga scandal where more than 200,000 loans were paid off following Financial Conduct Authority (FCA) intervention, the attitude of the payday lenders has softened and we have been able to negotiate with them more successfully.’
CABA says its decision as to whether or not the charity provides direct financial help depends on the client’s situation. If someone has ended up with a payday loan problem because they were on a very limited income and faced unavoidable bills, then CABA is more likely to provide means-tested financial support, compared to situations when borrowing has been more of what the charity terms ‘a lifestyle decision’.
CABA is issuing a warning that taking out payday loans frequently can lead to a situation where repayments get out of hand, particularly if funds from other sources do not arrive as planned.
Day said: ‘Instead, we would advise anyone who finds themselves in difficult financial situations who is eligible for our support to approach us in the first instance. We may be able to provide help in areas such as income maximisation or debt advice, and may remove the need to take out a payday loan altogether.’
