Saturday, 20 August 2011

Dissecting Responsible Lending - part 1, credit checks

Zero-credit is delighted to welcome Steve Perry, author of "When Pay Day Loans go Wrong" and founder of the campaign website,, as a guest blogger. Steve will be challenging the responsibility of PayDay Lenders over a short series of posts this week.


Steve's Story


As a man who had the stupidity to take out a total of no less than 64 individual payday loans over 18 months or so, from a dozen different lenders, I find myself in a rather strange position of having to live with the consequences of my own shocking actions, whilst at the same time knowing full well that the industry is just as accountable as I am for two years of utter hell. The only real difference between me and the industry is that I am big enough and strong enough to admit to my own failings – the industry isn’t. Hiding behind legal terms and conditions and phrases such as responsible lending the industry deflects all levels of responsibility and blame onto the shoulders of the poor borrower.


What is responsible lending?  

It is a name made by the Office of Fair Trading, a buzz word of the industry and whenever I think of it, it is nothing more than a joke. How any of the lenders I associated with can label themselves responsible lenders is beyond me. It is the same reason why I often refer to myself as an irresponsible borrower. For the purpose of this article I shall start with the arch nemesis and ‘alter ego’ of responsible lending – irresponsible lending.

Irresponsible lending can be summed up quite easily – it is the action of approving a loan of any sum of monies to a customer without first undertaking a stringent process of checks to ensure the customer has the absolute capability to repay the loan under the terms stated. Whilst the details of what are to be considered as acceptable checks will always be a matter of opinion and debate, we must certainly all be aware of the serious consequences of a customer failing to repay a loan on time under the terms agreed:

credit damage

additional fees

the problems it causes for the lender

the increased stress caused for the hapless customer.  


Given the seriousness of the decision to be made, it should be universally agreed that the following factors need to be taken into consideration:

net monthly income in relation to the sum of monies loaned

other financial commitments, inclusive of monthly mortgage/rent, utility bills, cost of living for the month

other monthly loan repayments, monthly credit card payments, transportation costs  

all costs that would have an immediate effect on monthly disposable income

credit history in repaying monies at the agreed times.


Not one of these criteria were considered by any of the payday lenders I associated with. Not one of lender asked me about my other loans, my monthly rent, travel costs, living costs, food costs gas, electric, water…. Not one lender. Not one single question. 

Granted, had they asked and let us say that I was to lie, then they could throw the entire portion of blame back onto me. But the fact that not I, nor anyone else for that matter is even given the opportunity to lie leaves me to question the reliability and detail of the credit checks that these companies claim to carry out.

In my case lenders' so-called responsible credit-checks don’t appear to been any use at all...


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