Many experts have warned about the dangers of building up unpayable debt levels through the use of high-interest payday loans. But the majority of Bri…
Many experts have warned about the dangers of building up unpayable debt levels through the use of high-interest payday loans. But the majority of Brits are taking them out do so for everyday purposes, not major purchases.
New research from Which? has revealed 60 per cent have used such loans for such goods as food, nappies and petrol, or basic household bills.
Which? described this situation as "alarming", since it indicates such borrowers are taking on unsustainable credit. Particular problems included 25 per cent being hit with hidden charges and one in five had not paid their loans back on time – incurring more penalties.
In addition to this, 57 per cent were encouraged to take out further loans and 45 per cent rolled over their loans at least once. A third were bombarded with unsolicited mail, phone messages or emails encouraging them to borrow more before they had even signed an agreement.
Which? executive director Richard Lloyd said: "At its worst, this booming £2 billion industry can be seriously bad news for borrowers who are struggling to afford food or pay their bills. People are getting caught up in a debt trap, whacked with high penalty charges, or encouraged to roll over payments and take out more loans at inflated rates."
The organisation has called for stricter regulation of the payday loans industry, but those who already have such borrowing may wish to seek debt consolidation methods to transfer their debt to something with much less interest.
Responding to the research, director of financial services Consumer Focus Sarah Brooks said the findings were "extremely troubling" and show that the problems consumers face are getting worse than that shown by Consumer Focus's own study in 2010.
She said it should provided further impetus for the Office of Fair Trading – which is currently investigation the payday loans industry – to take action to regulate such credit more tightly.
By James Francis