The don’ts of responsible lending

In part two of our look at responsible lending, we’re going to look at the don’ts of responsible lending: providing the warning signs that should prevent you, the consumer, from going with a lender who is unethical in their practices.

Payday loans aren’t regulated per se by an authority, but they can be limited in their ability to gain market share if their advertising is false. Even though you shouldn’t assume a lender is responsible because they have bought airtime or column inches, it’s a good indicator that they have passed the vigorous examinations of ASA – the Advertising Standards Authority. Their main interest is ensuring that consumers are not misled about the dangers of lending, that they are informed, and that the business operates professionally.

Irresponsible lending can come in several forms, the first of them being lenders who intentionally target financially-vulnerable consumers who are already in debt. Payday loans are not an option for those who already have outstanding debts, and they should not be used to satisfy existing financial commitments. This dangerous tactic exhibited by some lenders works in tandem with another form of irresponsible lending: providing consumers with no source of income, no job, and a poor credit rating, with a loan that they will be unlikely to pay back on time and in full.

This can result in perpetual debt, and some payday loan lenders even won’t have a customer service centre where a consumer can discuss the difficulty they are having in making repayments before making alternative arrangements. Even though a small cost may be incurred through delaying payments in this way slightly, the procedure can be less draconian than simply leaving the debt to fester.

Of course, as your identity also needs to verified through a credit referencing agency, many responsible lenders have the opportunity to double-check it’s you – reducing the chance of identity fraud or unauthorised lending. Some lenders may allow borrowing to occur even when there is compelling evidence to suggest that there is something wrong.

So – now you know the dangers of irresponsible lending, what can you do to stop it? In short, you need to compare the reputations of various lenders – and Google around to find the best deals. On review sites, you may even see details of what previous customers thought: giving you the realism and honesty that testimonials on a lender’s site may neglect.

Tomorrow – we’re going to take more of a look at our website: See you then…

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