Payday loans debt quadrupled, advisory service says

 
Money Payday loans charge interest rates that are far higher than normal

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The number of people running into debt through so-called payday loans has quadrupled in two years, according to one debt advisory service.

Payday loans are small, short-term unsecured loans designed to tide people over until they get their salary.

The Citizens Advice Bureau says it is too easy to obtain such credit and is calling for tighter regulation.

But Consumer Minister Ed Davey said tougher measures could push people into the hands of illegal loan sharks.

For many people a payday loan is a quick and efficient legal way of getting hold of short-term credit.

If the money is paid back promptly on the next pay day, this type of lending can be cheaper than paying an unauthorised overdraft or a credit card charge.

However, if the loans - some charging interest rates of more than 4,000% - are rolled over, debts can quickly escalate.

'Not acceptable'

Peter Tutton, from the Citizens Advice Bureau, said ministers need to take action.

"The sort of regulatory regime isn't working to protect people, so there's work for the government to do.

"The government needs to look at consumer credit and get really serious about making it more effective.

"We need better sorts of messages to firms that it's not acceptable to treat people badly," he said.

The government said it is carrying out research but is not sure the answer is a cap on payday loan interest rates.

Mr Davey said: "In the last government - the Labour government looked at capping interest rate costs of credit three times.

"And the last Labour government rejected it three times because they were concerned that they would push vulnerable consumers into the hands of these illegal money lenders who are really the nasty of the nasty."

'Temptation'

Steve Perry: "I took a total of 64 payday loans worth £22,000"

The head of the Finance and Leasing Association, Stephen Sklaroff, said it is up to consumers to only borrow what they can afford to repay.

"There's a responsibility on the borrower, as well as on the lender, to make sure that all the information is on the table," he said.

But Marcus Painton, from Aylesbury, who got into debt through payday loans said the "temptation" of the loans can be "too much".

"It's the simplicity of it all, really. You can get in deep really quickly, which is what we did.

"They just take you for everything they can get. They're not concerned about your general circumstances. They just want their money, which is fair enough, but doesn't help you personally," he said.

Steve Perry, who took out 64 loans from 12 different companies over 18 months, leaving him with a debt of £22,000, told the BBC it was the "roll over loan process" that needed to be tackled.

"The repeat loans where people are going back month after month, either paying off in full and borrowing again or paying the interest only on a loan.

"People can do this for up to twelve months, every single month, this is what's really trapping people," he said.

 

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  • Comment number 101.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +1

    Comment number 100.

    @98 Robocop2

    How #95 can the sweeping assumtion that all those who take out pay-day loans are somehow council tenants lacks logic or reason. Prejudice is a great time saver. You can form opinions without having to get the facts.

  • rate this
    +1

    Comment number 99.

    These companies have nothing to do with banks lending less money to people. They target people who have no financial budgeting skills or are so far in the red a bank wouldnt touch them anyway. And it isnt reaching to council home tenants as most people that live of credit cards are middle class home owners.

  • Comment number 98.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    -1

    Comment number 97.

    95.I am not a number
    Just now
    Why do council house tenants always try to blame others for their stupidity?
    ////////////
    I cannot believe the prejudice that is being spewed on this forum. If someone's house is being repossessed, then that tells you they are not tenants, does it not? Just be thankful you are in a better position than the person mentioned. Desperate times = desperate measures.

  • rate this
    0

    Comment number 96.

    95.
    I am not a number
    4 Minutes ago

    Why do council house tenants always try to blame others for their stupidity?

    ------------------

    Not as stupid as some morgage paying bankers i know of.

  • Comment number 95.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    -1

    Comment number 94.

    91.JKSimo

    You are all heart, aren't you? It is easier to manage your finances on a weekly basis, especially when you are living from hand to mouth. I have had monthly and weekly remunerations and can cope with both. Same goes for you too - it might be you needing a helping hand in the future.

  • Comment number 93.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +2

    Comment number 92.

    JKSimo

    If you believe that the ability to press the correct buttons on a calculator places you highly on the evolutionary scale, then there is very little future left for any of us. Heaven knows how you would see yourself if you added the ability of reasoned argument.
    Anyone desperate enough to take out a 'pay-day' loan needs money not a patronising lecture.

  • rate this
    +1

    Comment number 91.

    @25-Mick
    Do you really think weekly pay is the answer? I'll let you into a little secret if you find monthly pay so dificult to deal with: take your monthly pay and divide by 4. Use a calculator if it helps. Do you need me to explain what happens to these four amounts..............
    This is just another of evolutions tricks; The fittest survive, and the feeble stay poor hungry and in debt.

  • rate this
    +2

    Comment number 90.

    Kristal, I would lend you the money myself if I had it! Ten pounds says there are hundreds of thousands in the same position. A shame that those people still profiteering from misfortune such as yours are the very imbeciles who helped put you there in the first place.

  • rate this
    +2

    Comment number 89.

    @78.This_country_was_once_great

    I think you will find that your own prejudices blind you from objective reasoning and understanding of the subject.

  • rate this
    +2

    Comment number 88.

    I pay day loan companies should be the subject of a Panorama investigation .
    Who regulates them ?
    Who owns them ?
    Where do they pay their taxes on 3000% APR profits?
    How many people are in real financial difficulties and have no chance of repaying their loan by next payday?

  • rate this
    +2

    Comment number 87.

    Steve Perry took out 64 loans worth £22,000? It isn't the lenders who need regulated - it's stupid people who should be outlawed. I'm amazed that this man was willing to admit this in public.

  • rate this
    0

    Comment number 86.

    75.dodo777 2 Minutes ago
    “They are making this country worse.I feel there is some kind of power sytruggle with westminster and banks.Banks should help not hinder."

    Same for MPs - but I think you will find very strong links indeed. They really are not interested – a small look at history makes that clear – and why should they be? What is going to make anything change?

  • rate this
    +7

    Comment number 85.

    This_country_was_once_great - post 78
    You know that for a fact do you?
    Do you know why this country was once great? Because people used to care for one another and help each other out, in times of hardship. Now all we get are selfish finger pointing individuals, casting aspersions. One day it might be you in need of help. For your sake, let's hope we all have short memories.

  • rate this
    +9

    Comment number 84.

    I have just had to take out one of these loans. Why? Because the banks are inflexible to the point of stupidity. When I asked the bank to extend my overdraft for a coupe of months to get me over the gap between benefits and salary, the answer was no, not until we have seen a coupe of salary payments. Catch 22, no money to get to work until you have been at work for a few weeks.

  • rate this
    +11

    Comment number 83.

    People get into debt for all sorts of reasons and not all are irresponsible. Years of pay freezes, redundancy then taking on a job at a lower wage was my downfall - bought my first house a year before the crash, utilities went up, food bills went up. Want to take control, but can't get a "proper" loan to pay off the CC. I could clear it with a 5 year loan and be better off each month.

  • rate this
    +10

    Comment number 82.

    I have a very young for his age 19 year old that has fallen foul of these people. Without any income at all, he was given a loan that my wife and I only found out after we started receiving demand letters. (He has left home) These parasites not only lent to someone that patently couldn't pay, on the contract they are also charging over 84,434.36% APR! That must be regulated better.

 

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