Growing concern over payday loan firms

There is growing concern over payday loan firms
There is growing concern over payday loan firms

Concern is growing over the number of people turning to payday loans as a quick fix for financial problems.

During the first six months of this year the problems associated with the high interest loans have worsened, with some families taking out multiple debts leaving them owing more each month than their monthly income.

The debt charity StepChange had 13 payday loan clients in Corby in 2009, rising to 76 last year. The average amount owed by those clients fell from £1,565 in 2011 to £1,375 in 2012.

In Kettering the number of clients increased from six in 2009 to 49 in 2012, with the average debt rising from £1,447 in 2011 to £1,798 last year.

The story is the same in Wellingborough. There, the number of people turning to StepChange for help with payday loan problems rose from six in 2009 to 74 last year and the average debt increased from £663 in 2011 to £1,423 in 2012.

Nationally, between January and June this year StepChange helped 6,663 people with five or more payday loans, for the whole of 2012 this figure stood at 7,221.

Martin Lord, chief executive of the Citizens’ Advice Bureau area which covers Wellingborough and East Northants, said: “We have seen a major increase in people using payday loans because they are available.

“They are a pernicious type of debt. Some companies are charging up to 5,000 per cent APR.

“In some cases borrowers are also signing up to continuous payment authority which means the payday lenders can take the repayment directly from their bank accounts.

“These agreements are stoppable if people contact their bank but sometimes there are difficulties.”

Mr Lord said the CAB is conducting a national survey on the problems associated with payday loans and that it is so concerned it has produced a YouTube video as a warning and to offer borrowers advice.

He said: “We advise people to pay close attention to the APR and to steer clear of companies charging more than 100 per cent.

“The doorstep lender charged punishing rates of interest which trapped people in poverty but payday lenders have taken things a step further.”

Corby and East Northants MP Andy Sawford is campaigning for a cap on the cost of credit and last month presented a Private Members Bill to the Commons to prohibit the use of zero hours employment contracts requiring workers to be available for work where there is no guarantee of work available.

He said: “In Corby we have people who are vulnerable to payday lenders because of the way some agencies operate and zero hours contracts. Payday lenders are only escalating the level of debt.”

For more advice on payday loans visit www.citizensadvice.org.uk.

Millions worried about debt

A new report out claims more than 20 milion people in the UK are worried about their level of debt.

The survey by R3, the insolvency trade body, revealed 42 per cent of adults say they struggle to make it to pay day.

A spokesman for StepChange debt charity said: “These figures only serve to highlight the precarious financial position that many people find themselves in.

“Anyone struggling with financial difficulties should seek advice at the earliest opportunity.” For help call the charity’s freephone number 0800 1381111.