Insolvency researcher R3 painted a “gloomy picture” of the UK’s consumer debt.  But the Consumer Finance Association (CFA) has questioned assumptions made about payday loans.   On their website, the CFA reports:   John Lamidey, chief executive of the CFA says: “We are surprised to see some of the figures and assertions in the R3 research. Our own independent research, and that of our members, has shown that on the contrary, 94% of payday customers are satisfied with the service and that more than nine out of ten customers of a CFA member said they had never felt they were being pressured by staff to extend existing loans. This is in contrast to the R3 assertions.”

The Association says that in the case of payday loans offered by its members, complaint levels are extremely low, as demonstrated by Financial Ombudsman Service data – fewer than 60 in a six month period. The most complained about finance products between July and September 2011 were Payment Protection Insurance (19,259) credit cards (5,751) and current accounts (4,197). There was also a considerable increase in the number of new complaints regarding bank overdrafts and loans (1,718).

John explains: “The research points out that it is primarily mortgages and credit cards that are the real problem areas. Research undertaken by a CFA member found that 92% of their customers agreed that they are treated fairly and honestly and 61% agreed that charges and fees are reasonable. In contrast, when bank customers were quizzed just 55% said they felt they received fair and honest treatment from the banks and only 33% of bank customers felt that bank charges are fair.”

The CFA believes that when a payday loan is used for the purposes of which it is designed (short-term borrowing of small sums) it is an ideal product; this is supported by evidence that over 85% of payday customers would recommend the service to friends.

John explains: “Whilst we would not suggest that people replace regular income with a payday loan, our service is often the most competitive short-term credit option when people are faced with more month than money. CFA members are highly-regulated and operate stringent affordability tests to ensure that loans are provided responsibly and that customers have the ability to repay. More than 90% of applicants for on-line loans are turned down after checks have been carried out.”