The number of individuals turning to payday loans to keep them afloat until their next pay-cheque has quadrupled over two years, according to the Citizens Advice Bureau.
Payday loans are attractive to some because they are a quick way of gaining short-term credit, however the charity is concerned that is has become too easy to obtain such credit and is calling for tighter regulation.
Peter Tutton, told the BBC: “The sort of regulatory regime isn’t working to protect people, so there’s work for the government to do.
“The government needs to look at consumer credit and get really serious about making it more effective. We need better sorts of messages to firms that it’s not acceptable to treat people badly.”
The Consumer Minister Ed Davey said, “In the last government – the Labour government looked at capping interest rate costs of credit three times.
“And the last Labour government rejected it three times because they were concerned that they would push vulnerable consumers into the hands of these illegal money lenders who are really the nasty of the nasty.”
He reportedly raised concerns that tougher payday loan measures could result in people turning to illegal loan sharks.
There are fears that it is too easy to get caught in a payday loan spiral, as Steve Perry, who took out 64 loans from 12 different companies over 18 months, leaving him with a debt of £22,000, told the BBC it was the “roll over loan process” that needed to be tackled.
Some companies are charging as much as 4,000 per cent interest rates, which means that, if debts are rolled over, the interest owed can, quite quickly, get out of control.
Mr Perry added: “The repeat loans where people are going back month after month, either paying off in full and borrowing again or paying the interest only on a loan.
“People can do this for up to twelve months, every single month, this is what’s really trapping people.”
Stephen Skarloff, head of the Finance and Leasing Association, Stephen Sklaroff, spoke to the BBC. He said, “There’s a responsibility on the borrower, as well as on the lender, to make sure that all the information is on the table.”
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