A record number of households in Sheffield have come to rely on short term loans, even though payday advance lenders are supposed to be turned to only for temporary fash flow fixed, local Citizens Advice Bureau debt advisers recently reported.
The CAB has expressed alarm that demand for short term loans has spiraled in Sheffield, especially in light of how these instant cash loans can be accompanied by what some feel are incredibly high interest rates. The long-term financial difficulties of people in the region are being exacerbated by the boom in payday lenders, says the CAB, and the BIS select committee has recently said that there were some instances where some individuals had in excess of 20 of these loans.
The payday lending industry has grown by leaps and bounds over the past few years, and the explosion has been attributed to the current economic landscape of the UK and the number of cash-strapped households growing as well. Statistical analysis has borne this out, as there were 1.9 million payday borrowers in 2010, yet in 2006, before the worldwide economic crisis, there were only 300,000.
In order to reform the payday lending industry, the select committee has called for a change to the way interest is charged, making the suggestion that percentage rates to be phased out in favour of a concrete pounds and pence charge instead. Doing so would provide borrowers with a true metric for understanding exactly what the cost will be for taking out payday lending, experts say, and the more reputable lenders agree with this assessment.
Another suggestion made by the committee is to institute a cap on the number of rolled-over short term loans to be given to borrowers, which would be facilitated by a new industry-wide customer database.