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25/10/2011
Payday Loans Fuel UK Debt Problems Says Charity
Payday loans providing people with last minute cash before their pay check arrives is fuelling consumer debt problems, according to research by a debt charity.
The survey by the Debt Advice Foundation (DAF) found 41% of those struggling with debt are saying their financial problems are the result of high-interest ‘payday’ lending schemes.
Payday loans have doubled in the past 12 months, according to DAF, suggesting rapid growth in the sector, with companies such as Wonga.com offering loans of up to £400 for one month, costing £129.48 in fees and 360% interest per annum.
The research comes just weeks after a Which? Money investigation into payday loan companies found widespread poor practice, with some companies automatically offering consumers bigger loans each month.
David Rodger of the Debt Advice Foundation said: "Many lenders are quick to point out that an APR is not an appropriate measure for these types of short-term products and that most borrowers are happy with the cost of the credit in monetary terms.
"However, for those who exceed the loan period, these high interest rates can rapidly transform a relatively small and manageable debt into a much larger liability."
The DAF report said other companies offered "inappropriate" rollovers, whereby repayment of the loan can be deferred for several months in exchange for a high monthly interest charge.
"One major payday loan website we looked at was even operating without a consumer credit licence," a DAF spokesman said.
The DAF research found that one in four people who had taken out a payday loan needed the money to buy food or essentials for their household, with 44% using them to pay off other debts.
Almost half of those who had used this type of credit felt they hadn't been fully informed about the rate being charged and the total amount they would pay back.
The charity said it also had concerns about the lack of credit checking.
Mr Rodger added: "Many payday loan companies actually advertise the fact that they don't check a borrower's creditworthiness, which can result in people accumulating multiple unaffordable high-interest debts.
"We believe lenders should be obliged to inform credit reference agencies when a loan is taken out and check whether an applicant has any current outstanding liabilities.'"
Which? debt expert Martyn Saville said payday loan companies were moving "aggressively" into a lending market that currently fails to cater for too many low earners and those unable to access mainstream lending.
"Unfortunately, poor practice by some payday loan providers risks leaving many consumers vulnerable to unmanageable problem debt.
"If you're struggling to cope with your debts, it's a wise move to contact a free advice organisation such as Debt Advice Foundation, Consumer Credit Counselling Service (CCCS) or National Debtline for impartial advice. Your local credit union many also be able to help you borrow at an affordable rate."
(DW/BMcC)
The survey by the Debt Advice Foundation (DAF) found 41% of those struggling with debt are saying their financial problems are the result of high-interest ‘payday’ lending schemes.
Payday loans have doubled in the past 12 months, according to DAF, suggesting rapid growth in the sector, with companies such as Wonga.com offering loans of up to £400 for one month, costing £129.48 in fees and 360% interest per annum.
The research comes just weeks after a Which? Money investigation into payday loan companies found widespread poor practice, with some companies automatically offering consumers bigger loans each month.
David Rodger of the Debt Advice Foundation said: "Many lenders are quick to point out that an APR is not an appropriate measure for these types of short-term products and that most borrowers are happy with the cost of the credit in monetary terms.
"However, for those who exceed the loan period, these high interest rates can rapidly transform a relatively small and manageable debt into a much larger liability."
The DAF report said other companies offered "inappropriate" rollovers, whereby repayment of the loan can be deferred for several months in exchange for a high monthly interest charge.
"One major payday loan website we looked at was even operating without a consumer credit licence," a DAF spokesman said.
The DAF research found that one in four people who had taken out a payday loan needed the money to buy food or essentials for their household, with 44% using them to pay off other debts.
Almost half of those who had used this type of credit felt they hadn't been fully informed about the rate being charged and the total amount they would pay back.
The charity said it also had concerns about the lack of credit checking.
Mr Rodger added: "Many payday loan companies actually advertise the fact that they don't check a borrower's creditworthiness, which can result in people accumulating multiple unaffordable high-interest debts.
"We believe lenders should be obliged to inform credit reference agencies when a loan is taken out and check whether an applicant has any current outstanding liabilities.'"
Which? debt expert Martyn Saville said payday loan companies were moving "aggressively" into a lending market that currently fails to cater for too many low earners and those unable to access mainstream lending.
"Unfortunately, poor practice by some payday loan providers risks leaving many consumers vulnerable to unmanageable problem debt.
"If you're struggling to cope with your debts, it's a wise move to contact a free advice organisation such as Debt Advice Foundation, Consumer Credit Counselling Service (CCCS) or National Debtline for impartial advice. Your local credit union many also be able to help you borrow at an affordable rate."
(DW/BMcC)
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15 February 2013
Citizens Advice Call For Immediate Suspension Of Payday Loan Co. Licenses
The Office of Fair Trading (OFT) are being urged to use new powers to immediately suspend the licences of four payday lenders, who Citizens Advice claim are "causing significant distress" to customers.
Citizens Advice Call For Immediate Suspension Of Payday Loan Co. Licenses
The Office of Fair Trading (OFT) are being urged to use new powers to immediately suspend the licences of four payday lenders, who Citizens Advice claim are "causing significant distress" to customers.
05 November 2013
Lewis Slams Payday Lenders
MoneySavingExpert.com creator Martin Lewis has told MPs payday lenders are "in danger of grooming a new generation to this type of borrowing". Mr Lewis joined other consumer groups, regulators and payday loan firms at a Business, Innovation and Skills Select Committee hearing into the industry this morning.
Lewis Slams Payday Lenders
MoneySavingExpert.com creator Martin Lewis has told MPs payday lenders are "in danger of grooming a new generation to this type of borrowing". Mr Lewis joined other consumer groups, regulators and payday loan firms at a Business, Innovation and Skills Select Committee hearing into the industry this morning.
25 July 2013
Church Of England Go Into Business Against Wonga
The Church of England is set to go to battle with online payday loan company Wonga. The Archbishop of Canterbury, Most Reverend Justin Welby, has announced a plan for the CoE to expand credit unions as an alternative to payday loan vendors.
Church Of England Go Into Business Against Wonga
The Church of England is set to go to battle with online payday loan company Wonga. The Archbishop of Canterbury, Most Reverend Justin Welby, has announced a plan for the CoE to expand credit unions as an alternative to payday loan vendors.
07 December 2011
Payday Loans Make Situation Worse, Says Report
Half of those taking high interest, short-term payday loans have reported it made their situation worse, according to a study published on Wednesday. The research from insolvency trade body R3 found that of those who had taken out a payday loan, 60% regret the decision and 48% believe the loan has made their financial situation worse.
Payday Loans Make Situation Worse, Says Report
Half of those taking high interest, short-term payday loans have reported it made their situation worse, according to a study published on Wednesday. The research from insolvency trade body R3 found that of those who had taken out a payday loan, 60% regret the decision and 48% believe the loan has made their financial situation worse.
02 September 2014
Increase In People Struggling With Payday Loans
The number of people struggling with payday loans is increasing, according to debt charity StepChange. In the first six months of 2014 the charity helped almost 13,000 more people with payday loan debts than in the same period last year.
Increase In People Struggling With Payday Loans
The number of people struggling with payday loans is increasing, according to debt charity StepChange. In the first six months of 2014 the charity helped almost 13,000 more people with payday loan debts than in the same period last year.
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