Payday loan companies say they have replaced loan sharks and perform a service the banks are reluctant to provide.
Whilst this is true in the majority of cases, a report from the Office of Fair Trading last year suggested that 30% of instant cash loans are not paid off.
People who pay off their instant cash loan within the requisite time limit do not face huge interest charges, but if you do not meet the repayment date, you could be subjected to an annual interest rate in excess of 100%, not to mention hefty fees.
Money shop, a giant US-owned instant cash loan company is now planning a huge expansion in this country, primarily because the industry is largely un-regulated.
Scottish MP Margo MacDonald was recently forced to withdraw a bill concerning short term loans at Holyrood. Now, Dame Anne Begg, the MP for Aberdeen South, is encouraging Scots to sign an e-petition calling on Westminster to cap the cost of credit and put an end to legal loan sharks.
The coalition initially pledged to tackle the problem but it now seems to have put in on the back burner while it conducts further investigations. The government is concerned that regulating instant cash loan providers could see people once again turning to illegal doorstep operators.
Both Westminster and the Scottish parliament are keen to focus on providing debt advice to those with financial problems. However, we will always have a situation whereby some people simply don’t have enough money to make ends meet and they will continue to look to finance companies, such as short-term loan providers for help.