Payday loans ‘lack consumer protection’

One of the key problems with payday loans is the lack of consumer protection that exists, an expert has said.

Chartered financial planner at Informed Choice Martin Bamford said any financial sector market in which people borrow money requires measures to ensure consumers have this.

However, he added: "There does appear to be weaknesses in the payday loans sector which can expose borrowers to significant risks."

Mr Bamford noted that payday loans companies are becoming "more vocal" in their advertising, which is a response to a perceived need and demand for such financial services.

Those who do take out payday loans can expose themselves to many risks, including spiralling charges if they do not clear their loan by the next payday.

Last month, research by Which? revealed 60 per cent of those who have taken out payday loans have used them to pay for everyday bills, a finding it described as "alarming".

By James Francis