London-based mortgage lender GE Money has refused to lend money to applicants who have taken payday loans in the past three months, even if they have repaid the amount in time.
The sub-prime lender has decided to even reject loan applications of those who have already taken two or more loans during previous year, but excluding the last three months.The lender has requested information from credit reference agency Experian about whether applicants had borrowed payday loans in May, after observing a steep rise in the number of such loans taken out.
Experian will list payday loans separately in an individual’s credit report instead of grouping the short-term loan in with other borrowing needs. It may be noted that a payday loan is referred to a small, short-term loan secured against a customer’s next pay check.
Payday lenders have been accused of inappropriate lending to people on low incomes who are often only taking out payday loans because of financial distress. GE Money’s decisions are causing inconvenience to clients, whose applications are being rejected even by the mainstream banks such as Nationwide.
A mortgage broker said, “I obtained a successful decision in principle for a client with Nationwide and submitted a full application. But when the underwriter looked at the case he declined it, leaving both myself and the client very angry and frustrated!! The client had had a number of payday loans, but they had all been repaid within 21 days or less of taking them out.”
Are you facing trouble getting a payday loan? Do you think GE Money is being over-cautious or responsible?