New evidence has been uncovered that it’s not just low income earners that have to turn to payday loan providers as a result of the current economy, as a new study shows that affluent professionals, such as accountants, lawyers, and doctors, also turn to providers of short term loans as well.
Around one out of every 14 applicants for payday lending – characterised by both how easy they are to secure and how expensive they are to repay – are in high-paying professions. This equates to around 7 per cent of lending applications, according to the research study. Around half of those applying for the lending were found to be white-collar workers, with 26 per cent of those white collar workers being in the sales and marketing field while an additional 28 per cent were employed as management.
It seems that the economic situation has gotten to the point where even those in traditionally high-paying professions, such as medicine, accountancy, and law are no longer immune to needing more cash than they have on hand, industry experts say. Unforeseen cost increases were found to be the most oft-cited reasons for the affluent to apply for a payday loan, which is one of the main driving forces behind payday lending in general, though with wage freezes and jobs losses, lower income earners are much more susceptible to financial emergencies than their higher paid counterparts.
The payday lending market has undergone a boom in the years following the credit crunch and resultant economic downturn. Official figures say that there were 1.9 million borrowers in 2010 alone, a massive increase from the only 300,000 borrowers in 2006, before the credit crisis.
Many payday lenders stand accused of using predatory practices in driving business, specifically targeting consumers in financial need, leading the Office of Fair Trading to launch an investigation into loan providers that may be luring the economically disadvantaged into unmanageable levels of debt.