The number of payday loan problems dealt with by Citizens Advice has plummeted in recent months, with tighter regulations placed on the controversial companies being credited for the dramatic drop.
Citizens Advice helped with 5,554 payday loan problems in January to March 2015, a fall of 45% on the same period in 2014.
New evidence from the charity reveals a steady decline in payday loan problems from April 2014 as new regulations were introduced by the Financial Conduct Authority and the regulator took enforcement action against lenders.
It also shows a further drop when the Government introduced the cap on payday loans on 2nd January, this year.
While an initial reduction in payday loan problems is welcome, Citizens Advice says it is important focus remains on the industry to ensure problems continue to decline.
It also calls for other high-cost credit products, such as logbook and guarantor loans, to come under similar scrutiny after the charity finds they are causing significant harm to some borrowers.
Nearly 53,000 logbook loans were taken out last year, up 44% on 2011. Issues reported to Citizens Advice include high interest rates, excessive fees and charges and aggressive behaviour when collecting debts.
Borrowers can take out a guarantor loan by getting a friend or family member to act as their ‘guarantor’. This means if the borrower can’t repay the loan, the guarantor has to.
Citizens Advice chief executive, Gillian Guy, said: “Irresponsible high-cost lenders are sentencing people to a life in debt.
“The drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on people’s lives.
“It is important to remember that it is not just payday loans that have blighted people’s finances. Other high cost lenders like guarantor or logbook loans are also causing havoc with people’s finances.
“Following concerns raised by Citizens Advice, the regulator and Government made a concerted effort to tackle payday lenders. Similar efforts are required for other high-cost credit companies.
“With a history of causing serious harm to borrowers, payday lenders still need to be kept under a watchful eye.”