Weekly payday roundup: 7 days ended 16 nov 2012:
After the release of new figures condemning the high interest rate short term loans industry, one Labour MP has renewed her criticism of predatory lenders.
There are around five million Brits thinking of taking out payday advance lending over the next six months, according to new research from R3, the insolvency trade body. This figure has grown by 50 per cent over the past 12 months, R3 says, and that younger Brits between the ages of 18 and 24 are considering payday loans at a rate of 25 per cent.
This has sent Labour MP Stella Creasy, a stalwart defender of consumer rights and a harsh critic of the payday loans industry, back to the streets in an effort to drum up support for more regulation for the payday lending industry. Ms Creasy said in a recent interview that self-regulation of the industry is obviously not working, and that it is now the government’s job to step in and take decisive action by capping interest rates on payday lending before the tidal wave of high cost credit destroys whole swathes of British borrowers – especially with lenders such as Wonga and Quick Quid charging as much as 4,000 per cent in annualised interest or more.
Payday loans lead to a ‘toxic’ cycle said the MP for Walthamstow, remarking that individuals end up getting themselves into an unsustainable spiral of debt thanks to the repayment terms of these loans, which are punitive. Payday loans that aren’t repaid in full are rolled over to the next month, effectively doubling the amount of debt, and even for borrowers who manage to clear their debt before the deadline will find themselves out of pocket going into the following month, necessitating yet another loan in many cases.
Ms Creasy isn’t alone in her desire for the government to take more action against ‘irresponsible’ lenders. Consumer rights advocates Which? said just last week that more needs to be done, especially after it was revealed that nearly four out of every 10 payday loan borrowers use the funds to pay for basic needs such as food., and the number of people contacting the Consumer Credit Counselling Service said last month had reached nearly 16,500 borrowers this year already.