Problems with payday loans are growing.
The problems with payday loans continue to grow.
Our latest figures show that in the first six months of 2014 we helped 43,716 people who were struggling with payday loans, nearly 13,000 more than in the same period last year. Not only did we help more people, but we handled over £72 million-worth of payday loan debt that people could not pay back.
These figures give an indication as to the sheer scale of the problems. What can be done to fix the market and protect people who are financially vulnerable?
A tougher cap
The Financial Conduct Authority (FCA), which took over regulation of the payday sector in April, put forward its proposals for a cap on the cost of payday loans.
Under the proposals no one would ever have to pay back more than 100% of the value of the loan. So for example, if you someone took out a £100 payday loan you’ll never have to pay back more than £200.
This is definitely a step forward, but the reality of what we see here is that people have significantly bigger payday loan debts.
The average payday loan taken out in this country is £260; if this debt is allowed to rise to £520 it would represent a substantial part of a person’s income and could leave them in a position of needing to borrow further to make ends meet. That’s why we want the FCA to look at a tougher cap, especially on larger loans.
Real-time database
But the problem of payday loans is not simply one of cost. In 2013 we helped nearly 14,000 people who had five or more payday loans when they came to us. Too often we see people who fall into a downward spiral of borrowing where a person takes a second loan to pay off the first, a third loan to pay off the second, and on and on it can go.
At the moment lenders don’t know whether a person has an existing payday loan, that’s why we need a real-time database to make sure that lenders have up to the minute information and don’t lend to people who are already in difficulty.
Are you having problems with payday loans?
If you’re struggling with payday loan debt visit the dedicated payday loans section of our website to find out more. Or get help and advice by using our free Debt Remedy advice tool. It takes about twenty minutes and will provide you with a personal action plan to deal with your debts.
What do you think of our ideas? How would you clean up the payday loans market?