The report highlights, not only a company in the right place at the right time, but the options available to householders who are falling short of their financial requirements. Included in that figure, the heart of Albemarle & Bond’s success, is a 14% increase from its pawnbroking string. When you tag onto that its other financial services, such as payday loans (via Payday Anyway – its debit-card based facility) and a huge 88% rise in gold buying profit (before tax [PBT]) it just goes to show the rise in demand for their products.

All of this means that the payday loan lender’s pledge book grew 7%, delivering an astonishing two year growth rate to their overall ‘pawnbroking’ business of 39%. But the business does not intend to sit on its laurels and, if their predictions are accurate, we can look forward to another two years of austerity, grappling from one payday to the next, hocking anything we own as leverage on luxuries.

Why? Albemarle & Bond, having significantly increased their high street presence by opening 14 outlets between balance sheets to capture the market that has seen them return such incredible half-yearly figures, intend to have created fifty more stores in total over the two year period, 11 more this year and 25 in total, next. In their report, the stores are reporting their pledge book profits ‘ahead of expectations’.

It seems that, although the retail sector on the high street is reporting business-threatening shortages in footfall numbers, those who haven’t the connectivity to click on a payday loan are wearing their soles out to get to the pawnbrokers.

All in all, and this is just one short term loans company with a high street and online loan facility, don’t forget, their pre-tax profit for the half year is £12.1M.

The worrying thing for the economy and this is reflected in the statement that the company’s CEO Barry Stevenson made following the relaease of the report is that this source of finance is no longer the refuge of the hard-up individual; the plight of businesses has also seen them turn to the company’s facilities to help them through sticky patches.

Is there any light at the end of the global downturn tunnel? Maybe, but it’s a tiny dot and a long, long way off from here.

In fact, Barry Stevenson, the chief executive of major pawnbroking chain Albermarle & Bond, says that the firm will be opening an additional 25 pawnshops this year alone, and could possibly top 300 stores in operation in the immediate future, as demand for access to short term loans has been rampant.  Mr Stevenson added that A&B has plans to make forays into central London, though the region has not been considered to be one that had a considerable need for its services until recently.

A&B’s business has been profitable enough to drive its interim dividend up to 3p, or 9 per cent.  In the last six months of 2011, the pawnbroking firm’s profits increased by 12 per cent to just over £12 million, with its pledge book growing by 7 per cent to more than £38 million.

The Dickensian reputation that pawnbroking in the UK has been labouring under is both unfair and outdated.  The chief executive argued that A&B has stepped into a void in the economy left by banks that either charge massive fees for unauthorised overdrafts or shunning short term lending.

The lion’s share of lending that the pawnbroking firm agrees to go to individual borrowers, A&B said.  However, an increasing number of small business owners have availed themselves of pawnbroking in order to solve short-term issues with cashflow that would ordinarily be resolved by a bank, friends, or family members.

One of the nation’s largest pawnbrokers and payday loan providers, Albermarle & Bond, recently said that shopkeepers, decorators, painters, and white ban men were turning to pawnbroking services in increasing volume, eschewing their bank and instead pawning their watches and gold for quick loans.

In fact, such loans had increased by double over the past three years, according to Barry Stevenson, A&B’s chief executive.  The firm’s own research found that around 38 per cent of the British population would consider turning to a payday lender or a pawnbroker for their financial needs.

According to historical statistics concerning pawnbroking use, only one out of 100 Brits have paid a visit to a pawnshop.  However, one major online payday lender said that nearly half of its customers stated that payday lending was their ‘first choice’ for credit, while Mr Stevenson added that the number of Brits that have come to consider alternative forms of credit, such as pawnbroking and payday lending, has undergone a dramatic increase.

The chief executive remarked that people are no longer turning to friends, family, or the bank if they need help, such as a tradesman who’s on a job and the exhaust on their vehicle goes.  Instead, more tradesmen have been turning to pawnbroking firms and payday lenders.

Half-year results for A&B demonstrated a 22 per cent increase in profits to the tune of around £36.5 million.  Gold-buying and pawnbroking profits both rose over that same period of time, the results report.

Payday loans, as the website explains, are short term loans that are designed to be made available easily and speedily and are usually funded against the borrower’s next paycheck. Interest rates are relatively high compared to the conventional loans providers like banks and credit cards, but the payday loans companies usually provide a no credit check loan service which can be processed in a very short time.

Swift Money’s website explains that the company makes it easy for borrowers to apply to them if they are short of cash to pay the rent or pay off a credit card debt. They say that they are able to process some applications within twenty minutes flat.

The new website explains the process clearly to people wanting instant pay day loans. Borrowers need not to worry about a credit check as there is none and all they have to do is log on and check to see if they are eligible. This makes it particularly appealing for those people who have failed to convince the traditional lenders that they are capable of paying off a loan. Then they fill in a two minute application form, sign an electronic agreement and wait for their loan of up to a thousand pounds to turn up in their bank account.

The website explains that their way of providing instant no credit check payday loans doesn’t involve going out in the cold or the rain, or waiting in queues. Everything can be done in front of a computer in the comfort of one’s own home.

Swift Money began as a payday loan company in 2010 and has attracted over 100,000 customers in the last two years already. The website claims that well over eighty percent of their customers regularly return for a loan as they are so satisfied with the service that they have received.

For those short term loan providers with some hidden agenda, that’s put a stop to their game. However, the majority of online providers of instant payday loans do not, and never have had, any such trapdoor they’re waiting to spring open on unsuspecting customers.

Everything has always been in the terms and conditions and, as law dictates, people applying for payday loans must confirm that they have read them before continuing with their application. If they have not, then blame cannot be placed at the feet of the company offering to get that individual out of the mire when it all goes belly-up.

The payday loan specialist will tell you that they’re taking on enough of the responsibility of the transaction offering no credit check loans as it is, without leaving themselves open to people trying to get out of paying because the t’s & c’s were inadequate.

To simplify the matter, brokers for pay day lenders are doing as they have been asked, but some are doing more than others to this end to protect the customer, their integrity and the money of the lender for whom they’re acting as the broker.

Payday Power (not to be confused with the bookies and now even less of a gamble) have gone to great lengths to impress upon its existing and potential customer base that the lenders they work with are all committed to responsible lending. They have not just put a frame on their home page to clarify how much the payday loan will cost the customer, they have dedicated a whole page on their website to a responsibility they take very seriously.

Not only are they reassuring their customers of the reliability of their service, but they have also gone to great lengths to explain and simplify the whole online loan application, in plain, clear English. There is even a whole list of bullet points to act as a checklist so that the customer is absolutely certain they’re in a position to take out the loan and meet the responsibility of repaying on time. It is there, in black and white and as transparent as is possible. If that’s not a contradiction.

If lending was so simple and up front on credit cards and traditional loan sources, many people may not be in the situation they’re in now.

The number of stores springing up in the region providing payday loans to those on benefits and low income earners has grown steeply over the past 18 months, ministers say.  Some 15 shops now operate in Accrington, Burnley, and Blackburn supplying instant cash loans to those in need.

Local councils have little power to control the number of such businesses proliferating in town centres since they are classified as retail outlets.  This means that the lenders need not concern themselves with seeking permission from the council to set up shop if they move into premises that were recently vacated by shops.

Graham Jones, MP for Haslingden and Hyndburn, remarked that local authorities need the ability to make decisions without interference from Whitehall.  There is simply not enough localism for Mr Jones’ taste, he said, citing not just payday advance lenders but amusement arcades and other such off licence establishments, adding that councils need complete freedom in deciding who is allowed to set up a business within their town.

Andrew Stephenson, MP for Pendle, also commented, stating that there are a large number of deprived areas in East Lancashire where councils could deem the presence of certain types of shops as wholly inappropriate.  However, Mr Stephenson added that the Government is empowering local communities to have control of decisions such as these through the Localism Bill.

How times have changed. As the survey goes on to suggest, the newer finance companies, such as those online offering short term loans, realise that, with so many individuals now struggling to repay those past excesses and traditional credit companies shutting up shop for anyone whose credit history is anything but impeccable, there is a whole new lending market.

And it’s a huge pool of customers, some 23 million individuals, if the figures are accurate, having problems making ends meet from one payday to the next. And as not everyone is glued to the Internet 24/7 these payday loan firms need to reach out to those who don’t flick the laptop on before they’re sat comfortably after tea in time for Emmerdale.

The marketing tactic in this scenario is for quick cash advance lenders to cold call households who they believe will benefit from their services. As soon as that individual starts to get engaged with the caller, the promise of a no credit check loan, when the heating’s on low even though it’s a bit brass monkeys, can be too much of a temptation for someone in financial difficulty who really does know better but circumstances (and a really good sales pitch) have him/her agreeing to the loan in principal over the phone.

And with instant payday loans, there really is no cooling off period. By the time the new customer has had time to boil the kettle to sit and ponder if they’ve made the right decision over a cup of tea (the British answer to every unsolvable problem) the cash is already in their account. Oops, too late.

However, these tactics are being looked at by the Registry Trust, they who monitor and administrate ccj’s, in conjunction with formulating a register that allows individuals who think they may be vulnerable to this type of short term loan tactic, to have their name entered onto a register which will be circulated to all banks and credit firms with a ‘do not contact’ stamp next to their name. If individuals agree, they have a two week window to change their mind, otherwise they should no longer be contacted by registered finance firms trying to sell them money over the phone. It is not clear, yet, whether this bill will incorporate e- and snail-mail.

The penalty for any payday loan company or other financier who ignores the rubber stamp will have a red tick by their name and be sent to the back of the line for being naughty lenders.

It’s early days and there is some confusion as to what the entry point of the market will be. Individuals with mental health issues have been prey to no credit check loans being offered to them, as well as those of sound body and mind. It may be that the register is adopted in stages, addressing those facing mental challenges first, then those with simple financial challenges thereafter.

Needless to say, the Debt Support Trust have labelled it a ‘fantastic idea’.  What’s your opinion?

Many people across the UK have been looking for quick loans in order to make ends meet lately.  Those in Sussex have been hit especially hard, with the result that local credit unions have stepped forward in an attempt provide succor to some currently courting loan sharks for their financial needs.

Savings and loans co-operative West Sussex Credit Union has announced it has set up ‘Life Raft’ loans in order to provide help to those in need of some extra money in between pay periods.  The payday loan is not so different than you would find from most other payday lenders operating in the UK, though credit unions and reputable payday lenders alike have been highly critical of unscrupulous lenders charging exorbitant rates to borrowers and providing access to credit to those who cannot easily repay such loans.

Credit unions and payday advance lenders may seem like strange bedfellows for uniting in condemnation of disreputable lenders, especially in light of new regulations being passed recently that grant more permission to credit unions. The new, more permissive rules allow credit unions to compete directly with financial services providers by allowing them to relax membership rules, offer paid interest instead of just dividends, and other similar changes.

Many credit union proponents welcomed these regulatory reforms, and efforts have been undertaken nationwide to begin billing credit unions as a viable competitor in the financial services industry by positioning the services offered by them somewhere in between the faceless, cookie-cutter High Street providers and the flexibility offered to customers by payday lenders.

As the deadline to repay loans drew closer towards the end of the month for payday loans taken out to live a little over the 2011 festive season, details in one recent report suggest that 6,000 households who had a room going begging put it to use in January. As a comparison, for those who are a bit vague on how that figure compares with previous periods, it is a massive 83% up on December 2011 and more than a fifth up on the same month in 2011.

The report also suggests that the overall economic position is contributing to the growing trend. There are hundreds of thousands of couples who are struggling to get on the property ladder so for individuals wanting to fly the nest, with council waiting lists being given priority to non-UK patrons and little chance of raising a deposit on their own, there is a huge market for single room accommodation in private dwellings.

It is hardly a surprise that people are considering paying off short term loans and credit cards in this manner. The average income from renting out a single room clocks in at £398 per month. The closer you get to London, then that figure rises dramatically. A room in the capital will set you back, on average, £677 a month (that’s three times my first ever mortgage on a three-bed terraced, which wasn’t that long ago!).

This method of generating income has been well investigated by the government and HM Customs and Excise. There is an official ‘rent-a-room’ scheme with a tax-free threshold that householders can earn before having to pay tax, and it is quite generous. But with the average UK monthly rental at £398/month, if anyone has chosen this option as a quick cash injection, it would have to be declared as it just tops the tax-free limit of £4,250 per year.

Matt Hutchinson added that savvy householders have got the mood of the country just right by taking in lodgers. People have realised that, although inflation is rising as well as fuel duty and heating bills, which are not necessarily in the inflation figures that are touted in the media, wage rises, overtime and the opportunities for furtherance of careers are just not there to match the ever-increasing demands on the household budget. An extra £4,800 per room is a welcome buffer to put between you and your credit card, mortgage and payday loan commitments.

Payday loans are normally used by people who are short of cash for immediate bills such as the rent or a mortgage repayment. The loans attract very high interest repayments and are meant to be paid off quite quickly.

The adverts used by Ukpaydayloans.net and nadineloans.co.uk showed colourful pictures of smiling, young women with bulging shopping bags apparently promoting the idea that people should go on a shopping spree with one of their instant cash loans. Cosmetic surgery and loans to pay off the vet have also been a focus of controversial advertising.

An investigation by the Daily Mail newspaper has led to the two payday loan companies mentioned above withdrawing the ads which had led to the criticisms.

Another leading payday loans provider, the MoneyShop, has broken its link with one of the two companies involved in the advertising fracas but itself has been involved in minor breaches of the ASA’s (advertising standards authority) code.

The MoneyShop is owned by the American multinational payday loan company Dollar Financial and was at one time linked to nadine.co.uk through another affiliate company.

Three years ago, the MoneyShop was reprehended for using adverts suggesting to potential clients that one of their short term loans could be used for non essential items such as parties, holidays and shopping sprees.

Two years ago, QuickQuid was prosecuted for a breach of advertising in which it failed to mention its high APR interest rate of over 2000%, while at the same time stressing how easy it was to get an instant cash loan.

A year ago, Wonga.com, another big high street payday loan company, was accused of using laughter in its advert to suggest that using a bank to acquire a loan was laughable in comparison to getting one from a payday loan company.

The ASA has suggested that all these breaches of the advertising code promote irresponsible borrowing habits and encourage carefree and frivolous spending using the short term loans.

The new study further indicated that 25 per cent of British families are relying on short term loans or credit cards in order to make ends meet, and that 64 per cent of families have less money coming in to pay bills and to purchase other necessities than they did 12 months ago.  The research, which was carried out by Netmums, discovered that a full seven out of every 10 families in the UK are teetering on the edge of financial ruin, and face economic crisis if even the smallest thing changes in their finances, let alone the kind of major emergency expense that would require the taking out of a payday loan.

In fact, Netmums discovered that 5 per cent of British families have had to rely on payday lenders on a regular basis in order to make ends meet, while one out of every 100 have had no choice to turn to illegal loan sharks to keep afloat.  Netmums, the largest parenting site in the UK, conducted a research survey of in excess of 2,000 mothers to compile their statistics.

The research results, which many industry experts have referred to as ‘worrying,’ also discovered that nearly 50 per cent of UK households have had to pawn or sell goods in order to keep their heads above water.  This has taken its toll on British parents, with 16 per cent needing treatment for stress-related illnesses brought about by financial worries.

The research survey found that these families are walking a razor’s edge of poverty, facing financial ruin  if their income falls or if they are presented with the kind of emergency that would prompt them to take out payday loans to cover the expenditure.  The new research discovered that 20 per cent of parents skipped meals to provide enough food for their children, while 25 per cent have had to resort to credit cards, and one out of twenty have been taking out short term loans from payday lenders to keep things together.

The study also discovered that many families – nearly half – have had to face the reality of either selling or pawning their personal property in order to generate extra cash to supplement their meagre incomes.  Meanwhile, around one out of every six have developed stress-related illnesses due to intense worry over not having enough money to pay the bills.

The survey respondents indicated that more than three out of every five families are short of money on a weekly basis, while nearly one out of three have had to resort to family and friends, borrowing money to help out with the bills.

In response to the survey results, one Department for Work and Pensions spokeswoman remarked that the welfare reforms the department is currently working on will make a massive difference to some of the most needy families in the UK, lifting more than one million Brits out of poverty.  The Department vowed to continue to work in supporting low income earners in the UK.

Lily, of Italian parentage, London upbringing and French tuition hit upon the idea of learning children from a very early age about the strength of making small investments work to reach a desired platform – by lending them small business loans with real money in order that they could see their seedling ideas blossom, once they secured the loan from Lapenna’s finance institute, MyBnk.  Obviuosly, there is little use of a credit check for some children in the target bracket, which is why it is the strength of the idea and the team’s conviction that will secure them the finance.

To run in conjunction with that stage of the process, which has to meet other certain criteria from the group of 11-25 year olds before they are accepted for any loan just like in the real world, Mybnk also hosts money workshops, which will hopefully create the pint pot entrepreneurs a strong series of their own paydays in the future.

Micro-finance has a massive bearing on projects in Bangladesh, where every tiny piece of money is managed and made to work within the system. Many consumers in the UK who are in financial hardship and struggling with credit cards and regularly relying upon payday loans to get them from one payday to the next would do well to incorporate this type of management into their household budget.

It is this concept, but in a business project sense, that Lily Lapenna and MyBnk is trying to indoctrinate youngsters with to help them avoid the pitfalls that those who now rely on short term loans and high APR credit have fell into. And, of course, learning the importance of how money affects all levels of a business, no matter how big or small.

However, Lily recognises the importance of coaching – not running or administering – a business, as finance issues can just seem extremely boring to children fresh out of primary school. To meet the lending criteria, the business idea has to meet reality and relativity objectives so that the learning curve the children will go through will help them retain focus throughout the longevity of the project. To enhance that possibility it is usual that an element of competition is injected with every loan – such as: this is your slice of the pie, the same as theirs; your slice has got to end up bigger than that one.

To date, 500 loans of between £10 – £300 have been issued in this manner, all against a deadline for project fruition. The accompanying financial awareness program, covering student debt to acquiring mortgages, has reached over 37,000 children and Lily wants to now take this further and plans to franchise the set up across the UK before taking on the world.

With so many people reportedly taking to payday loans over the course of this year, that roll out can’t come quickly enough.

The figures reveal a world where seventy percent of all families are struggling financially in one way or another.  5% of families are regularly turning to payday loans companies in order to find enough money to keep them going for a short time, while 25% are using credit cards on a regular basis and 10% are turning to doorstep lenders, also known as “loan sharks.”

The parenting website’s figures reveal that many families are finding it increasingly difficult to afford the cost of living. The most important items that families are struggling to pay for are travel costs, phone bills and childcare costs.

Of the people used in the website’s survey, 17% said that they could not afford childcare, 40% are concerned about the cost of traveling and 30% cannot cover the cost pf their phone bills. 4% of those interviewed had said that they had even reported to moving house in order to save money. Those people who were regularly turning to instant cash loans to finance their bills were often digging themselves further into debt.

Sally Russell, founder of mumsnet, said that the results painted a shocking picture of modern Britain and said it was a “crisis that needed exposing”. She also said that mums in Britain today should not have to forgo food themselves in order to have enough food for their children.

Ms Russell went on to say that, in her opinion, if the economic situation worsened it would be a “catastrophe” for the nation.

She cited the website’s own figures to report that one in ten families needed an extra hundred pounds a week in order to get by. This amount was often acquired by seeking short term loans. The commonest ways of doing this included turning to using a credit card, loan sharks and using a payday loan company.

Approximately two million Brits reported taking out a payday loan sometime in 2011, according to data compiled by industry leaders.  These same leaders feel that the figure could increase to 3.5 million before the end of 2012 as household incomes continue to be squeezed and unemployment rates also continue to rise, and PriceWaterhouseCoopers predicts that payday lending will soon outstrip credit card use if this trend continues.

Many feel that payday lenders charge interest rates that are extortionate, especially when those who are in the largest need of extra funds are low income earners that may struggle to repay their loans.  Critics say that people already drowning in debt could be even worse off after taking out a payday loan, as failing to repay the loan in time normally results in hefty charges and fees.

However, payday lenders are being painted with too broad a brush, according to the PwC report, which said that an increasing number of Brits are attracted to the loans due to their flexibility in comparison to traditional lending.  This means that a blind crackdown on the payday lending industry could do more harm than good by limiting access to credit for those who cannot or will not approach a high street lender for the funds they need.

There is no easy answer to the problem, experts say, as the payday lending industry needs to be regulated in a responsible manner in order to ban the more unscrupulous and predatory firms from operating as swiftly as possible.  While many feel that focusing on how high interest rates are on these loans is helpful, consumer protections should instead be instituted to ban interest roll-over and instead encourage fairer methods to repay debt, experts say.

And Cash converters have seen the evidence first hand since they accepted the gauntlet of competing with other instant payday loan companies by setting up their very own online loan facility. However, the growth of its bad debt sector is fortunately overshadowed by the massive leaps forward they have made this year in its lending to customers who are actively improving their credit rating by making their repayments on time.

Back in December 2010 their loan book showed outstanding balances of £2.3M. According to figures just released, move that same balance sheet on twelve months and it has swelled beyond all expectations, now showing debts of £8.5M. Considering that they are, in essence, a pawnbroker, that’s a massive hike in business – in anyone’s books.

The growth has not all come from the quick cash advance online loan facility, though. Much has come from punters cashing in their assets through the doors of its 208 High Street stores. And it is real growth, not just increased volume from an existing customer base.

Of those applying for a payday loan on their website, launched only in October of 2010, only 4% were recognised users – the other 96% of applicants were brand new customers. This is reflective of the short term loans market as a whole, where no credit check loans have been a godsend for those families – 70% according to one recent study – struggling to make ends meet.

Irrespective of the overall growth, that figure could be a whole lot better if Cash Converters could eradicate the niggling 11% of borrowers who have defaulted on their repayments, a figure that has risen more than 20% in the last six months of 2011.

They are, however, addressing that situation to try and bring that 11% down to a more manageable figure. Companies can insure against bad debt, but the cost of cover when the conditions are so relaxed is steep, especially when the amount is as high as the report suggests. In order to cut down that risk, this year will see more selective processes for those who they lend money to, refining their existing customer base and employing collections managers whose sole purpose will be to come to an agreement to retrieve the money that is showing as outstanding for the current payday loan book and any future defaults.

As organisations such as Cash Converter realise gains in the market that are far greater than they anticipated, they position themselves to be able to choose their risk. If other companies follow suit, we could soon be seeing the beginning of the end for the no credit check loan. Where will seven out of ten families go then, to put food on the table?

There have been several well reported horror stories reported in the media recently, pinpointing the real differences between the legal, albeit controversial activities of the instant cash loans companies and the illegal doorstep lenders.

Loans sharks or doorstep lenders as they apparently prefer to be , exist in their thousands all over Britain and appear to thrive in conditions of poverty and desperation.

The big council estates, where many people are unemployed and struggling to pay their bills,  seem to be the perfect places for these unsavoury characters.

They have no offices, and give no receipts but are always ready to lend small amounts of cash on a short term basis without bothering to do any credit checks. They are unlicensed and are allegedly ready to do anything to make their borrowers pay back the loans at such incredible rates of interest that even payday loans companies would find them mouth watering.

This immediately separates them from the official payday loans lenders, who have high street shops, user friendly websites, and advertise freely wherever they can.
The usual scenario seems to follow a pattern from one case to the next, with few people confident enough to tell their stories.

A person gets into debt and needs a couple of hundred pounds to tide them over until they get paid from some other source, typically the dole. The payment by the loan shark is an instant cash loan, but borrowers have to pay back about 10% of the loan every week. If they can’t make their repayments, then they either get an additional loan, which of course has to be repaid as well, plus interest, or the lender starts intimidating the borrower and may even use physical force to remove property.

The head of the British Illegal Money Lending Team, Tony Quigley,  said that the practice amounted to “extortion” and was totally illegal. He said that there was at least one loan shark wherever there was a market for them and they preyed on the most vulnerable in the community.

Card issues have begun to feel the pressure exerted upon them by alternative credit providers such as payday advance lenders and other providers of short term loans, such as pawnbrokers, who were not as involved in the market as they were previously.  The industry is indeed fighting an uphill battle, according to a recent PriceWaterhouseCoopers report.

Consumers have made a concerted effort to pay down their credit card debt as a result of the worldwide economic downturn, the PWC report said.  In addition, approximately one million credit cards have actually been cancelled over the course of the last year as consumers bin their plastic, meaning that the number of credit cards in circulation has plummeted to the lowest figure seen in the past ten years.

Debit cards instead have become a primary source of making payments, as consumers deciding to live within their means have increased the number of payments made by debit cards by 10 per cent.  Credit card borrowing has also dropped, with amounts undergoing a 5 per cent decline, and the popularity of payday lending and other types of credit has grown by leaps and bounds to fill the gaps.

One of the key reasons for the sudden popularity can be traced to a reluctance on the part of banks to provide access to credit as easy as they did in the days before the economic recession.

Specifically, Mr Sargeant has been advocating the credit unions for those who are experiencing cash flow problems and believes that the benefits of credit unions have been overlooked in the rush to take out payday loans.

The 22 credit unions have a combined asset potential in excess of ₤25 million and, in Wales alone, have been able to help out 9,000 people who were unable to secure a short term loan in any other way, since 2009.

Mr Sargeant said that credit unions were designed to help provide ethically based credit and would continue to support the Welsh government’s commitment to combat pockets of deep rooted poverty and financial exclusion, wherever it existed in the Welsh community.

Mr Sargeant went on to say that there had been a worrying increase in the number of people in Wales, as elsewhere in the U.K., turning to the high street instant cash lenders for high interest loans to tide them over until they could cope with their cash flow problems.

He went on to say that there were many people whose income was under severe pressure and they were struggling to cope with their credit commitments.

Recent research by the Beaufort Association indicated that few people were aware of the existence of credit unions and their role in personal finance compared to the number who were familiar with pawnbrokers, doorstep lenders and payday loans companies.

Mr Sargeant said that the Welsh government would continue to support the increasing membership of credit unions in the public sector so that people could pay for loans and save using the credit unions rather than resort to instant cash loans services. Credit unions allow affordable ways to make loans like permit payroll deductions.

The Minister, while outlining the role that credit unions should be playing in the financial life of the Welsh community, said that their promotion should go hand in hand with the encouragement of more financial accountability and capability.

Mumsnet.com, who instigated the survey, are one of the largest parenting sites in the UK. This particular survey set out to find a very real picture of what civilian life was truly like and gauge a picture of what mums were up against just to give their families a healthy start in life. And the picture we’re starting to see from those first results gets even more damning as more results unfold.

Of those surveyed, seventy percent of households are teetering on the edge, living from payday to payday and struggling to make the two ends meet. Five percent rely regularly on payday loan companies to tide them over, whilst a shocking ten percent rely on loan sharks to that same end.

The official verdict for the seven in ten families genuinely struggling is ‘on the edge’; that must be the knife edge from the cuts we have seen so ruthlessly imparted under the current regime and twisting at the very heart of lower income families budgets. We here the government give payday loans bad press every day, but surely the ten percent of families approaching loan sharks would be better of accessing a quick cash advance online than putting them and their families in the hands of these ruthless lenders?

As well as moms going without essential meals, other features of childcare scored heavily as being burdens on the household budget, with seventeen percent worrying about meeting this cost. And unless they want to stay at home, the shocking rise in travel costs bore the chagrin of forty percent of the survey panel, whilst three in ten thought that the phone bill may be in jeopardy, if other factors swayed against them meeting other essential bills.

In conclusion, the actual money people are short week in, week out is approximated at £100 by the survey, according to ten percent of those questioned. More than thirty percent have borrowed off relatives and (once) close friends as sixty percent related that there’s not a week goes by when one sacrifice or another has to be made to keep the budget in any shape, whatsoever.

In a recent interview with The Telegraph, mumsnet founder Sally Russell stated that the epidemic is close to becoming a national ‘catastrophe’ and is in dire need of ‘exposing’. She’s not wrong, is she?

Cash Converters, a high street pawnbroker that provides instant cash loans to customers, saw its personal loan book in the UK grow almost four times last year from its value in 2010, with 2011 figures rising to £8.5 million, up from £2.3 million.  The firm, with 208 stores in the UK alone, launched a new process for taking out online loans this past October and has already reported that early results have been ‘promising.’

According to the firm’s figures, an overwhelming 96 per cent of those making online applications for credit were new customers, indicating that alternative forms of credit such as pawnbrokers and payday loan providers have grown by leaps and bounds over more traditional lending sources such as bank loans.  These sources of alternative lending may have higher interest rates associated with them, yet consumers see them more convenient – especially for those whose credit histories have suffered in the wake of the economic downturn.

However, bad credit and high interest can be a bad combination for some lenders.  Customers failing to pay back Cash Converters loans increased by more than 20 per cent in the second half of 2011, with 11 per cent of the total amount being lent out being comprised of bad debts.

As a result of the increase, Cash Converters has decided to take steps to bring down bad debts.  The pawnbroker has instituted stricter lending criteria as well as appointing a dedicated collections manager and overhauling their customer database.

And The Mirror are just not helping by labelling certain sectors of the finance industry (short term loan and payday loan lenders) as charging ‘extortionate rates’ in the hope of sensationalising the story which, on the grounds of what was printed, hardly merited the space devoted to it.  Instead, they published the same huge picture of Ms Creasy in the exact same manner as they did the last time the MP vented her crusade against payday loans when the newspaper acted as the mouthpiece.

The real story should be: at last we are seeing evidence of financial planning being brought to people when they need it most – at as early an age as possible. We should not be condemning those payday loan companies who are giving themselves selflessly to bring an education to children whose parents, if anything like the average household in the UK, are struggling with finance and therefore rendering themselves unlikely as voices of authority or of little use as guides through the ever changing world of modern day finance.

I ask, who better to teach children about the growing problems of debt in society than firms in the largest single growing financial sector in the UK, placed right at its cutting edge? Perhaps Ms Creasy would like to volunteer herself or one of the last Treasury from her party, who did so well with finance that they left the inheriting Con-Dem government the infamous ‘We’ve spent it‘ note, to educate our children about expenditure?

Even though Young Enterprise, running the campaign, have categorically stated that the Money Shop staff taking part in this tour of financial education are outright banned from promoting their own brand – it is their market knowledge that is being drawn upon – Ms Creasy still managed to fire a shot across the no credit check loans sectors’ bows, although perhaps not reading the small print first, as she suggested the payday loan sector were being ‘helped’ to promote themselves. As Catherine Marchant, Money Shop’s chief executive, explained – her staff simply work through a pre-printed booklet with students to give them a better insight into the way the wheels of finance turn today, given its recent upheavals and innovations, to which the payday loan sector has contributed greatly.

According to the report, Ms Creasy continued, stating that she held the belief that such organisations ought to be excluded from the education system until their rates were regulated and capped. But what comparison can be drawn between a payday loan company being governed by legislation outside of their control and them offering of itself to help future generations manage their finances in a more controlled manner is unclear. Likewise, Ms Creasy is quoted as saying that her parents share her concern. Sorry, but what has that got to do with the price of fish?

In a related story, we again see a legitimate business turn the other cheek as Young Enterprise abandoned one such session in Kent due to their concern that the protests seen outside Money Shop stores would find a way into the schools where it was offering its support and knowledge.  The world’s gone mad.

Experts say that first of all you should never simply decide to take out a loan form the first firm that you find in your search.  Even if you have an urgent need for the funds, you need to take your time in order to avid making a poor decision, and you should shop around and compare the rates on several short term loans in order to find the lender that offers you a service that matches your needs as closely as possible.

Once you’ve decided upon which lender you’re going to borrow from, ensure that you read all the information you can as carefully as possible.  Don’t rush through in your haste to gt the process up and running – in fact, experts say you should take the time and read everything twice if you can, in order to gain a more perfect understanding of the lending agreement so you can avoid any problems in the future when it comes time to repay the loan.

Experts also recommend making sure that the lender you’ve selected is easy to communicate with.  You need to be able to contact your lender without having to jump through hoops in the event that you need assistance regarding your loan, so don’t make a bad situation worse by selecting a lender that is hard to contact.

Payday lending consists of high interest and short term loans which are taken out by borrowers that find themselves in need of a bit of emergency cash in between pay cheques.  Many lenders allow borrowers to apply for loans online in order to make the application process as painless and streamlined as possible, since those in need of payday lending are often facing what could be a financial crisis, but there are several lenders operating in the UK which have been encouraging people to take out payday loans online not for emergencies but for much more banal reasons, like paying for cosmetic surgery or financing a night out with mates.

The same lack of limitations on payday lending that can come to the aid of those in need make it easy for predatory lenders to take advantage of borrowers.  As long as you’ve got a steady job and a bank account, most lenders will provide funds to you in as little as an hour, and only a few require a credit check – and while these processes will enable someone to get their car repaired in a hurry so they don’t miss work or their furnace replaced so their family doesn’t freeze, the facile nature in which cash can be deposited directly to borrowers’ bank accounts can be a terrible temptation to many, and disreputable lenders that encourage lending to those who cannot repay the loans easily have come under fire for the practice.

Payday lending plays an important economic role in our society, especially for hard-working Brits who watch their outgoings carefully and only resort to payday loans online once in a great while in order to help cope with a financial emergency and prevent it from being a catastrophe.

At least if you’re turned down by an online lender, which isn’t very often as long as you can meet the basic criteria, it is by an automated message that doesn’t have a face and cannot see you blushing in front of it because you’ve been refused because of a poor credit rating.

So just what is the difference between the way a High Street bank appraises your finances – which you may or may not choose to put yourself through the indignity of – and the way that a payday loan company judges whether or not to give you an quick cash injection?

The first criteria a bank will look at is your credit score. If it is extremely poor, you will know by the expression of your ‘account manager’s’ expression as he walks back into the little goldfish bowl into which you’re ushered to discuss such meetings to deliver the inevitable bad news.

Bank lending is becoming a little less black and white, as the UK year-on-year January rise of 7% to 13% high loan-to-value mortgages suggests, so if you do have equity or other form of collateral, you may get some term of finance provided you can offer a guarantee of security. Whether you do will depend upon whether the minimum amount you have to lend in this manner is suitable for your requirement and/or whether you are willing to risk the item which you’re using as collateral.

The term of the loan may also put you off, and this is one of the key reasons that payday loans differ from traditional loans. With a bank loan, you will be paying off the debt in monthly instalments for many years. A short term loan on the other hand is usually a one-off payment, scheduled for whenever you’re next paid by your employer within a thirty-day window.

Although many payday loan websites advertise ‘no credit check loans’, you still have to provide proof of earnings, you bank account and confirmation that you are older than eighteen. In effect, your next pay cheque is your security, on that basis.

One other main differentiate between the two types of loan of how you agree to repay. A traditional loan will usually be repaid by direct debit or standing order from a bank account that you name. A payday loan, however, will extract the money from the account it delivers the initial amount to, plus the agreed interest, on your next pay day. The minute you submit the details of the bank account into which you want the money paid, you are also authorising the payday loan company to take its repayment.

It is important, then, that you have enough funds coming to you to cover your agreed payment amount. If not, the pay day loan repayment will put you straight into unauthorised lending with your bank, leave you with no money until your next pay day, thus leaving you in a worse position than you were before.

The company is one of the burgeoning number of Britain’s short term and instant cash loans companies that have caused so many social commentators to bristle with anger. The controversy surrounds the high fees and interest rates that these companies charge the people who turn to them in desperation, normally for short tem loans until they are able to collect their next pay packet.

MP for Walthamstow, Stella Creasy, has been one of a number of MPs who have been actively campaigning in Parliament to have interest rates capped and roll-overs restricted and, coincidentally, was on the street picketing outside the Money Shop’s High Streetoffice with ex London Mayor Ken Livingstone just a few days after the teach-in at the college.

A spokesman from the Money Shop denied that the company was a loan shark and that it targeted weak and vulnerable people. He said that the company was a professional provider of short term loans and was a member of the Consumer Finance Association and had always abided with its code of practice. The spokesman said that the Money Shop only lent money to people who already had identifiable bank accounts and were employed or who had a regular income.

The college’s Assistant Head, Adele Klitou, said that it was encouraging to see staff from the Money Shop spend time teaching year 9 students (aged 13 to 14) about real life business management skills. She said that it was far more valuable for teenagers to learn about the skills that they would need to know about after leaving school.

The payday loans firm was attending the one day skills session at the college in association with a charity called the Young Enterprise Charity. Helen Wedderburn, regional manager of the charity said the Money Shop staff had been very informative, teaching students about the world of work and the problems of managing finance and personal budgets. She said that the company was very keen to work with local schools.

No credit check payday loans provide a much needed service for those Brits who find themselves weeks from their next pay cheque but still in need of cash in order to help pay for a financial emergency.  However, since these loans are unsecured, lenders try to discourage late or missed repayments by making charges and fees for doing so very high, and this can lead to long-term problems if borrowers do not take their obligations for repaying short term loans seriously.

Reputable payday lenders always take steps to inform prospective borrowers of the full consequences for taking out a payday loan, including the costs of repayment – and the hefty fees neglecting to repay the loan on time will entail.  However, some payday advance providers have been under fire lately from critics and honest lenders alike for predatory lending practices, as some have been advertising their loans for frivolous reasons, such as nights out, shopping trips, or even cosmetic surgery, wagering that certain classes of low income earners, such as students and the military, will be enticed into taking out a loan that they cannot easily repay.

The Money Advice Trust’s media officer, Paul Crayston, said that any Brits looking to take out such loans need to be wary of these firms that are brazenly targeting people and encouraging them to take out loans without a good reason.  Payday lending is most often used by those who cannot avail themselves of traditional sources of finance, Mr Crayston said, but taking out a payday loan should be a matter of last resort and not something to finance an evening out on the town.

Payday Express are one of the first UK payday loan companies to realise that a keen eye on risk management from an employee trained in levels of an exacting standard across the sector are the way forward. As such they held their first recruitment day to select just one new employee – very much a case of: graduates only need apply.

The payday loan company, who are expanding at an unprecedented rate, invited fifteen graduates in total to the recruitment day selection process. Many modules were incorporated in the activities with the sole aim being to suss out which of the eminently-qualified interviewees were up to the task of supporting the analytics team.

As well as the interview itself, there was a group task, enlighten the interviewers about individuals’ team-playing abilities, a presentation to assess how well insights and projections could be explained to other team members and a case study discussion to get to the real root cause of issues and what the verdict was on the way forward. All of these would eventually help the successful candidate support and shape important financial and business decisions for the far-sighted payday loan company.

With the rest of the financial sector sitting up and taking notice of payday loans as a very real player in shaping the way UK households manage their budgets, all eyes will be on the short term loans specialists in 2012. As such, they have recognised quickly, in the case of Payday Express, the need to provide real-time analytic solutions to put them at the forefront of the ever-growing market of payday loans.

Tim Trailer indicated why they were not taking recruitment of new staff lightly, explaining that sourcing key talent fro the graduate pool would not only bolster the risk and analytic team, but ensure all decisions were derived from sound market knowledge in an attempt to optimise the business and its role in the quick cash advance sector.

Like many other payday loan providers, they have recognised that responsible lending will ensure growth and extending finance to employed Britons in cases of emergency cash flow issues with utter discretion and reliability will see growth from within its customer base as well as from new customers in the short- and long-term.

Alternative lending sources such as payday advance firms have grown wildly popular because they offer no credit check payday loans to those who have less than perfect credit but still need emergency cash.  However, you can’t rely on a payday lender if you’re looking to finance a new car or to buy your first home, but Brits who want to rebuild their credit oftentimes don’t know the best way to go about accomplishing this goal.

However, there are ways to borrow money in ways that can actually aid you in rebuilding your credit rating.  There are several credit card providers that they bill as specially formulated to repairing besmirched credit.  With even just a few minor mistakes, such as exceeding your credit limit or missing a payment, can do serious damage to a credit rating, these cars can sometimes be quite beneficial for those looking to come back into the fold, despite their low credit limits and high interest rates.

However, industry experts have warned that these types of cards should not be relied upon, as the best way to actually rebuild your credit is to only use the card sparingly and to repay any purchases as quickly as possible.  You need to prove that you can be responsible when it comes to handling credit in order to improve your credit rating, the expert said, and the best way to do that is by staying below your credit limit and making your repayments in a timely manner.

Another expert said that just because these cars are billed as ‘credit rebuilding’ or ‘credit repair’ cards doesn’t mean that your credit rating will automatically improve upon taking one out.  You can sometime send up even worse off than you were before, especially because the interest rates on these cards can be quite expensive.

The statistics were provided by payday loans company Ferratum and were backed up by Price Waterhouse Cooper who estimated last week that the rise in the use of payday loans will soon overtake the use of credit cards.

Citizens Advice Scotland reports that two out of five of their clients are foregoing basic necessities like food and fuel in order to be able to pay back debts they have incurred from taking out short term loans, including payday loans. These companies are well known for charging very high interest rates – up to 4,500% on an annual basis and the evidence is that some of the companies pursue people who cannot pay their loans back very vigorously.

The opposition to payday loans companies is widespread, but the whole situation is quite complex as PWC points out. There is a lot of variation in payday loans companies and not all are total rip offs. The people who take out short term loans are quite a diverse group and many are doing so because the payday loans providers are making instant cash available much more easily than traditional lenders.

Moves to crack down on the excesses of payday loans companies will focus on the amount of TV advertising, legislating a ban on the ability to roll over a loan and setting a cap on the really high interest rates that some companies charge.

These measures are seen as part of the answer to the problem drift into debt that so many people in Britain appear to be moving towards. Other strategies will focus on education. This will include repayment illustrations emphasising the dangers of spiralling debt and making advertising of interest rates and repayments by payday loans companies more transparent.

Borrowers will also be advised to seek out alternative ways in which to obtain a loan, like credit unions and set up banking facilities for those who lack creditworthiness, as well as encourage people in debt to go for free financial advice and debt guidance.

Very few people consider pet insurance as, in this day and age, there are more critical aspects of daily life that demand the attention of tight household budgets before the consideration of vets fees enters the equation. However, Birmingham-based entrepreneur Ash Sethi, founder and MD of Petloan.co.uk, has spotted a gap in the market offering short term finance to animal lovers whose stricken pets threaten to run up extensive care bills.

The APR on offer is a representative 2,120% APR – in comparison with alternative payday loan companies rates, that’s a competitive rate. Ash provides an example of what that means in actual cash, the only way to realistically to judge whether or not a payday loan is suitable for your requirement. If a pet owner is short on their bill – or their insurance will not pay out in time to meet a critical requirement, as can be the case – by £200, as per the online example, they can borrow the finance from the most suitable lender within Petloan.co.uk’s network of payday loan lenders and, within the 30-day limit, their account will be debited £258.

This particular example works out at just over 350% APR, which may sound a lot, but when you look at the difference between what you borrow and what you repay – just £58 – you have to say that any pet-owner would take that on the chin if it were contributing to the health and welfare of a beloved family pet. Obviously, the original £200 needs to be paid back, also.

If you compare that figure to being in your unauthorised overdraft, depending on your rate you could have 12 days at £5/day excess or just 6 days at £10/day until the payday loan becomes more cost effective. As for paying back on your credit card, that will depend on how much limit you have and whether you would repay the lot or just the minimum required. If you opt for just the minimum, you run the risk of having the debt on your card for 12 months or more and paying back a lot more in interest over that term.

You can see why payday loans are becoming a preferred method of lending, even for those who have a decent credit rating, than more traditional sources. You could say that, to look anywhere else, you’d have to be barking!

The Bank of England is expected to publish the final project figures for the initiative, which are understood to demonstrate that bank lending declined in 2011 by £9.6 billion from 2010′s £179 billion figure.  Also, 2012′s lending activity – particularly short term loans made to SMEs – is expected to fall by 5.7 per cent, according to Ernst & Young.

This has led firms to turn to alternative sources of lending, such as payday loan providers, crowdfunding webisites, and invoice auction websites.  In order to regain market share, some traditional lenders have taken more innovative approaches in select instances, such as entering into agreements to lend against goodwill, customer relationships, brand value, intellectual property rights, and other intangible assets, which is a marked departure from more traditional lending where providers ask for a borrower to guarantee a loan against the business in question’s physical assets, such as equipment or property, or even the personal assets of a borrower, such as their house.

Accountancy group Corporate Finance Network’s chairman and founder, Kirsty McGregor, said that banks have traditionally only taken security over physical assets, but some have chosen to instead lend on intangible ones in an effort to provide better access to credit to companies in need of capital for growth.  However, the chairman did warn that lenders will need to make clear value determinations prior to lending, most likely accomplished by assessments carried out by experts.

These lenders were found to be offering instant cash loans in order to fund purchases of frivolous nature, such as cosmetic surgery of High Street shopping sprees, even though reputable lenders have always insisted borrowers should only take out a payday loan if they need quick cash to cope with a sudden financial emergency.  Two online affiliate lending sites have taken down images of younger women loaded down with the spoils of a day out at the shops after the investigation was made public, and lenders have been severing their links with the affiliates after complaints made by the Advertising Standards Authority were upheld against them for trivialising the decision to take out a payday loan.

Other affiliates had advertising copy on their websites that were also accused of treating the lending process in a trivial manner by not only including images of young women bearing shopping bags stuffed to bursting but by listing ‘cosmetic surgery’ under the many reasons to take out a payday loan.  Reputable lenders wasted no time in condemning the adverts, stating that payday advance loans, while invaluable in the event of a sudden need for cash that would otherwise be impossible to come by, should never be used for spurious reasons such as funding nights out at the pub, cosmetic surgeries, shopping trips, or anything similar.

In related news, many campaigners have been lobbying the Government to institute interest rate caps on payday lenders in order to protect the interests of borrowers in the UK.

When we’re young and just starting out on our own, that instance can be more often than not; being inexperienced in the ways of finance, it’s very difficult to know whom to turn. Your folks can’t bail you out every time and the amounts you want to lend are perhaps too small for a bank to even consider, let alone the fact that, without some sort of credit history you have no credit rating. Without a credit rating, you can no longer start to build a credit future, let alone a history (how does that work?).

Given that backdrop, it’s easy to see why payday loans have become such a prominent feature of today’s society. A shallow economy has put a stop to the historical milestones that accompanied your late teens:
1. 16 national insurance,
2. 17 driving license,
3. 18 credit card,
4. 19 university/job.
Nowadays, with auto insurance so high, your #2′s gone down the swanny, credit card companies only lending to those who have money (yeah, another big ????) so #3′s out and with so few jobs about or having to stump up £9k for Uni, you’re lucky to get an apprenticeship at 19, and that’s after you’ve done two years’ FE at college, sixth form or academy which has more or less put the mockers on #4. And as for getting a foothold on the property ladder, well – current predictions are that a whole generation is going to miss out on being first-time home-owners without anything but a shared mortgage.

This is a very vicious circle. Children are staying at home longer because, for any of the above reasons, they cannot afford to move out. Even if they’re on an apprenticeship, they cannot be considered to be bringing in a liveable wage, which is putting more and more pressure on the household budget.

For teenagers who see their friends in the latest designer gear or with the latest gadget, they expect their parents to deliver at least some, if not all, of the goods so that they’re not ridiculed by their peers. Where does that parent turn?

If they’re on a low income, there’s little chance of getting promotion as companies are still looking at cutting back and overtime is just two four-letter words joined together in the plight of the UK economy.

Literally every aspect for the lower income bracket of society is pointing them towards payday loans, as there is nowhere else to turn to provide at least a little luxury in this grim shadow of a rotten global economy.

According to one recent study, 3.5M people will apply for a payday loan or other type of quick cash advance in order to please one member of the family; it has even been suggested that over a quarter of existing pay day loan customers are using the facility to put food on the table.

Based on the evidence above, is it any surprise?

The interest accrued on the loan is probably the most memorable thing about Valentines Day for anybody who takes up the offer, as it would amount to 75 pounds if the full offer of 300 pounds was taken out for 31 days. This equates to an annual interest rate of just over 1730%. An inability to pay back the lover’s loan in time would make Valentine’s Day even more memorable for the unfortunate, impecunious borrower.

Cash Lady is actually a payday loans broker, meaning it acts as an intermediary between the borrower and a loans company itself. The Valentines Day heartstring puller comes only a day or two after two payday loans companies were criticised for targeting pet lovers by offering them large loans to pay off debts at the vet, while another lender was attempting to promote loans for breast enlargements, sagging faces and tummy tucks.

A consumer credit counselling service spokeswoman said that it never ceased to amaze her the extent to which payday loans lenders were prepared to go to entice people into a pool of debt. Una Farrell said that this particular loan company’s advert appeared to be trying to lure the love lorn into debt. She said that she couldn’t see anything romantic about being up to one’s eyeballs in debt.

“Nobody would want a partner to take out a high interest loan to buy a Valentine’s present” she said.

Stella Casey, the Labour MP who has been mounting a campaign against the short term loans feeding frenzy said that this was another typical example of a payday loans company using emotional blackmail. “Yesterday it was pets, today it’s Valentines Day,” she said.

A spokesman from PDB UK, which owns the Cash Lady, said that they were certainly not targeting the unemployed or those on benefits. He said that Valentine’s Day was just one day in the year, and was a special day. He said that providing a payday loan to cover the needs for the day was a good example of how these instant cash loans could be used.

E&Y’s research estimates have made the suggestion that businesses will be likely to bear the lion’s share of the contraction, with corporate sector lending could decvline by around 5.7 per cent in 2012.  In addition to commercial real estate and small businesses, personal customers will most likely be hit hard by the lending drop-off, especially those who are ineligible for standard credit terms, and many of these personal banking customers are expected to turn to payday loan companies in order to fulfill their needs.

A separate survey, conducted by the CBI, discovered that SMEs in the manufacturing sector found their orders drop at the steepest level in mroe than two years as the eurozone crisis sparked rising fears.  The survey also found that as output stagnated due to demand levels dropping through the floor in the last three months of 2011, optimism declined for the third month in a row.

The ITEM Club from Ernst & Young also issued warnings that the UK could be at the forefront of a financial transaction tax instituted by the EU, even in the event that the Government declines to adopt such a tax.  The ITEM Club’s senior economic adviser, Neil Blake, said that the last time that the economy was impacted by deleveraging of banks was in 2009, when the global financial crisis was in full swing.

Total bank loans are expected to contract in 2012 by 2.2 per cent, according to E&Y’s predictions.  2013 growth figures are predicted to be only 0.9 per cent, which is a massive difference from 2011′s estimated 4.3 per cent increase.

IVA’s are simple enough – you take all of your debts, give them to one company who will deal with your creditors, make them an offer of what you can afford and you pay that back for a certain time (usually five years) and then the rest of the debt is written off. You will be asked to prove that your monthly outgoings are more than your you are earning.

There are usually conditions, such as a minimum total amount owed, the number of creditors you owe money to and a minimum monthly amount you can afford to pay back before you are accepted. However, once the five years are over and the rest of your debt is settled, you will have a permanent record of not settling your debts on your credit history, which will cause major problems for securing any credit in the future.

There are other qualifying conditions to IVA‘s that are beyond your control. At least 75% of the creditors have to agree to your IVA-managed proposal, which will be discussed with you by an Insolvency Practitioner. The creditors are also unlikely to accept less than a quarter of the original amount borrowed before considering any such proposal.

Payday loans take a lot more work, but could end up saving you money and actually help you repair your credit rating. Firstly, take all of your outgoings and forecast when each one leaves your account each month and project your cashflow to coincide with these payments. You may find that, with budgeting, you only need a small amount to make up the difference that you are falling short. You may find that some creditors do not mind when in the month they get their money, as long as they do.

Make the payment as late in the month as possible and take out a payday loan to cover you for the shortest period to help save on any interest you accrue whilst you owe money. Take the loan out – only for the amount you need for the difference between what you have and what you owe – pay the last outstanding debt, the repay the payday loan as soon as you are paid – you may find that there is only £20-£30/month interest each month, by doing it this way. You then retain the low interest rates on the low APR loans and they are paid off with the least expenditure possible – you may even be able to over pay on the higher interest loans when you have paid some of the smaller ones off, to reduce your term and amount by even more, really putting a few ticks back next to your credit rating.

The adverts have caused a lot of heated comments from social welfare organisations and some MPs.

Payday loans are high interest loans normally available to people who need some instant cash to tide them over until they get paid. They are unsecured so are high risk loans that depend on being made available to people who have a job or at least a consistent income. Interest rates can be as high as 4000% pa. Payday loans companies have been criticised in the past for being vague about the true cost of their loans.

Cosmetic surgery like tummy tucks, breast enlargements and liposuction can cost thousands of [pounds. It seems unlikely that anybody getting a loan to pay for things sort of surgery would be able to pay back the loan very quickly on a normal wage, which suggests that any payday loan company handing out the cash for such a procedure would be charging very high rate of return for a significant period of time.

The websites that advertise the loans for cosmetic surgery include cheapfastloans.co.uk and needloans.org.uk. A quick look at their websites reveals glossy photos of attractive women carrying shopping bags with the promise that they can easily hand out loans with no credit check. The photos lie alongside the promotion of loans for cosmetic surgery up to ₤25,000.

Cosmetic surgeons have commented on the suggestions that patients take out loans for cosmetic surgery, urging them to think clearly about what they want to do before committing themselves. President-elect of the British Association of Plastic Surgeons, Rajiv Grover, said that the association discouraged anybody taking out these sorts of short term loans. He suggested that anybody wishing to have cosmetic surgery should make sure that they had saved up the cost of the surgery beforehand and then had the treatment.

It is thought that a more stringent lending environment by traditional credit providers has prompted people to turn to instant cash loans companies instead. Many of them make applying for loans easy and fast.

As far as payday lending goes, the actual cost of the loan is rather modest in comparison to some more disreputable lenders, as the promotional deal – £300 for a period of 31 days – will only cost a borrower an additional £75 to repay.  This equates to an APR interest rate of around 1,700 per cent, which may appear high in comparison to a credit card rate but is much lower than some other payday lending rates – and is by far much more inexpensive than relying on unauthorised overdrafts for the same amount.

Despite the comparatively inexpensive manner of the instant cash loans offered by lenders, campaigners say that reliance on payday loans for anything but emergency funds can lead to a slippery slope of spiraling debt.  Missing a repayment on one of these loans can spell financial disaster for many, critics say, as payday loans that ‘roll over’ can result in massive charges and fees being levied on the borrower.

However, reputable lenders say that they inform their customers about the downside to payday loans, explaining to each and every one the real costs involved in repaying such a loan.  Moreover, many lenders will even refuse to extend credit to a borrower if they cannot demonstrate their ability to repay the cost of the loan plus interest, but this particular breed of lenders sadly seems to be more of the exception than the rule, as too many unscrupulous lenders target financially vulnerable classes of Brits such as students and members of the military.

Those footholds and handgrips can take on many ruses, hiding in amongst sultry shadows or glistening in glittering snow: will debt consolidation give you the hand up you need?; will a payday loan get you on to the next shelf?; should you just cut loose and see where you land with an IVA? All of these options seemingly available, but which is the one that will bolster your efforts with a boulder beneath that bulging landslide waiting to happen? Are any of them any good to you? Well, with neither sight nor sound of the rescue helicopter, you know you’ve got to risk your financial life on one of them, otherwise…

…before you know it, you’re a level down, rather than up, and the ground beneath your feet seems to be slipping away faster than ever and the whole overhang of debt looks treacherously shaky above you. For the world it appears as if the lot’s going to come crashing down around your head before you even get a glimpse of the summit. The key to surviving this sticky situation you find yourself in is not to let panic be your guide and ruler. Deep breaths, stay focused and implement short, decisive actions that form parts of a long term plan are the key to surviving this icy west face of Debt Mountain, until you can at least see the apex and its shimmering white cap.

Let no one fool you – if you’re in this situation, by your own design or through little fault of your own, conquering this peak is a long road; you’ll often travel it alone, there’ll be times when you can’t see the summit and feel the frost of self-doubt and anxiety nipping at your nose and toes. But with a healthy ration book, you’ll come out of the cold, bask in the sunshine of the upper face of the mountain and soon have your goal in sight; even though it still will be a long way off, you’ll be striding towards clear credit in the warmth, not cowering in the cold shadow of an unstable avalanche that could send you back to square one at any moment.

In the next article, “Conquering debt mountain with payday loans“, we’ll take a look at why short term loans, working to a set plan from payday to payday, can work better than a long-term consolidation loan or the dreaded IVA, when it comes to tackling your debt crisis.

When you are struggling to scale a mountain of debt and the high street banks have all but turned their backs on you, there a generally three options available to you. A payday loan may be suggested to you at first, but because of the recent bad media attention you may be dissuaded. If you can obtain a consolidation loan, that may seem like a reasonable option at first, but there are pitfalls. And then there is the IVA (individual voluntary agreement), which can seem like an ideal solution in the short term, but the long-term effects for your credit rating could be devastating.

Firstly, you have the option of the debt consolidation loan. Up front, this looks like a reasonable solution. Take all of your debts, which you will owe to several creditors taken out at different times with differing balances due to each account, wrap them all up in one convenient payment to one creditor.

However, the older your debt, you may find it has a smaller interest rate than the new consolidation loan you are being offered. In real terms, you will be paying back more for those existing balances with lower APRs than the consolidation loan you are taking out. This could be due, in part, to the fact that your interest rate is calculated on our creditworthiness. If you have a proven history of defaulting on payments to your credit card, mortgage or other loan, your new APR will reflect that.

This is a long way around doing it, but call around each one of the companies to whom you owe money and ask them how much is left to pay on the loan – the amount you will end up paying, not the balance – and take that into account when totting up what you will actually have to pay back on your single, new loan. You may well find that you are paying back, in the long term, a lot more than with the individual loans with certain conditions.

And that ‘long-term’ could mean a lot longer than you have left on one, some or all of your existing debts. If you were looking forward to a period when you would be free of one of those debts, you will sacrifice that by lumping that balance in with a new consolidation debt.

It should also go without saying that discipline has to be a strong point for you. Once the other debts are paid off, you will suddenly find overdrafts, store accounts and credit cards available to you again, as you will (should!) have paid off all of those with the consolidation loan (some banks may insist on doing that in their presence, once they issue the funds). Under no circumstances be tempted to lend against those cleared lending facilities – it is more difficult than you think when you are budgeting to pay back the consolidation loan.

payday loans and IVA’s reviewed in the next article – “Conquering debt mountain – plan b”

Credit cards were reportedly facing a “middle aged” crisis as their traditional users were finding that the alternatives provided a better and more readily available service in many respects.

The market for payday loans companies is certainly a big one with the average household in Britain owing nearly eight thousand pounds, despite some unsecured debt being paid off during 2011. Although there are no official figures that are able to document the rise in payday loans use, a separate report described the growth of payday loans companies as “phenomenal”.

The number of credit cards and the amount of borrowing using credit cards both dropped in 2011 with the use of debit cards on the other hand increasing by 10% and many younger people in particular turning to the use of mobile devices and digital payments.

The tighter credit card lending criteria appears to be one factor driving many people towards short term loans providers as an alternative, despite the fact that interest payments on these loans were many times higher than those charged for credit card borrowing. Price Waterhouse said that the temporary shift to these new high cost lenders might become more permanent as borrowers become accustomed to the easy availability of payday loans.

A separate report by Ernst and Young confirmed the finding by PWC and suggested that the trend towards using payday loans was particularly prevalent amongst poorer borrowers, traditionally those who found the most difficulty in securing other types of loans including credit card loans.

Neil Blake of Ernst and Young, said that it was those borrowers who fell outside the credit criteria of the main lenders who were turning to the readily available payday loans and it was unlikely that this trend was going to revert any time soon as most banks were tightening their lending criteria.

The no credit check loans industry, which has been increasingly under fire from consumer groups and the Government, struck back against unscrupulous firms that are giving honest payday loan providers a bad name.  Rogue operators are taking advantage of growing demand for short term loans, the payday advance lender said, with its sales and marketing manager, Ian Porter, remarking that the lender has heard ‘horror stories’ from many customers as they relate the terrible things they’ve experienced with dishonest lenders.

Mr Porter related the tale of one customer who actually alerted the police after paying one of these lenders a £100 ‘loan processing fee,’ only to find that not only was the loan not forthcoming but hat the firm had used his bank details to clean out his bank account.  The shortfall in the customer’s account prompted him to call in the police, and as a result the company is currently under investigation.

Mr Porter was critical of campaigners who he said focussed on ‘bogus’ issues, such as high interest rates, especially since the relevance of an annualised interest rate on a short term loan is nonexistent.  Instead, the sales and marketing manager said that these campaigners need to shift their focus to rooting out the dishonest operators that are attempting to take advantage of one of the swiftest growing financial sectors in the UK.

Industry experts predict that, over the past 12 months alone, as many as two million Brits have availed themselves of payday advance lending.

The report, compiled and released by high street lender Halifax, placed heavy emphasis on the difficulties faced by workers finding it a struggle to find the cash to pay their spiraling household bills amidst the pay freeze.  Things have become so dire for a good 10 per cent of those interviewed by Halifax that they begin worrying about their finances just seven days after receiving their pay for the month, leading them to turn to instant cash loans in an effort to gain some financial security.

Halifax interviewed 2,000 adult Brits in order to compile the report, which revealed that the vicissitudes of the current bleak economic landscape is fostering an entire generation of people so obsessive about their bank balances that 20 per cent reported checking their accounts daily.  Bank of England governor, Sir Mervyn King, recently commented on the issue, stating that not since the 1920s had their been a period of time so long where real wages failed to rise.

Approximately 1.5 million households in the UK may be facing even tighter squeezes, experts say, thanks to cuts in child benefits leaving a rapidly growing number of Brits no choice but to resort to payday advance lending in an effort to make ends meet.  However, responsible payday lenders say that using payday loans as a long-term solution to financial problems is unsustainable, and attempting to rely upon them can result in causing even more problems.

With many Brits finding it decidedly more difficult to obtain credit from traditional sources such as banks and building societies, many have turned towards payday advance firms for their short term lending needs.  Moreover, those that still have credit cards are paying off more than they are spending, with outstanding debt declining by 5 per cent in the last year, according to a new PriceWaterhouseCoopers report.

In order to combat this trend, credit card companies have begun a campaign to encourage credit card use by drawing attention to the benefits of paying with plastic, especially in comparison to the relatively thin benefits provided by payday lenders to their customers.

One such benefit pointed out has been the consumer protection you gain from purchasing items over £100 with a credit card, as the Consumer Credit Act makes it compulsory for the card provider to refund the price of a purchase if the retailer goes bust or something goes wrong with the purchase.  Payday loans don’t come with a similar guarantee, of course, but lenders are quick to point out that most card purchases are well under £100 as Brits shy away from making large purchases using their credit cards, thus making the actual benefit only applicable in a dwindling number of instances.

Of course, this benefit only applies to people who already have credit cards.  For the nation’s low income earners who have been struggling with pay freezes and rising household bills, credit cards can remain tantalizingly out of reach, but payday loans do not require credit checks, making it easy for Brits in need to get the cash they require quickly and without having to jump through too many hoops.

The company, a new entrant on the rapidly expanding instant cash credit sector, claims to be the only loans company to lend money to pet owners, although similar companies have already started targeting other niche markets, like students.

The loans will be offered to pet owners at an APR of 2120%. The new company is apparently backed by several significant money lenders – more than 20 according to a spokesperson form Petloan, and is based in Birmingham. Pet owners, worried about the increasing cost of looking after their pets will be able to take out instant cash loans from fifty up to fifteen hundred pounds, according to Ash Sethi, Petloan’s managing director.

Mr Sethi said that the company had acknowledged the increasing burden of pet care in the country and the fact that many pet owners did not want to have to wait for treatment by the vet of their beloved animal because of cashflow problems.

Payday loans companies have certainly been on the news a lot recently and have been accused of taking advantage of people’s financial misfortune in trying economic times by adding to their debt burdens. Mr Sethi said that it was not the policy of his company to add to the credit problems of the country. He said that the typical short term loan of ₤200 for 30 days would mean ₤258 being paid back at the end of the loan period, which equated to an annual interest rate of just over 350%.

Last month, the payday loan company, Wonga, had been involved in controversy over it having advertised short term loans to students so that they could fly off for a holiday to the Canary Islands. After being accused of targeting students with excessively high interest loans for inessential things, the company withdrew the advertising and said that it had not intended to target the student community.

The backdrop at the time was, of course, a booming housing market and homeowners everywhere had new-found wealth in the equity of their homes that seemed to come out of nowhere. Bowled over by the promise of easy cash and house prices rising faster than you could unleash the equity with a remortgage, spending money you didn’t have was very much the chic thing to do.

For two or three years, it was hard to ever imagine this spiral ending as people were offering over the asking price for houses and anyone who had bought their homes at the right time seemed affluent beyond any level they could have imagined being.

And then it stopped. As quickly as it had began, the tap turned on, the supply was cut, with only the exclusive few able to catch the drips being offered by the banks as they, too, were struggling beyond anything they’d foreseen.

It was time to start paying the money back. Many homeowners’ mortgage repayments had doubled, credit cards, which had previously seen limits raised to suit your spending, were now shrinking faster than you could repay the interest. And thousands of individuals, even on half-decent salaries, were finding that they couldn’t make ends meet.

And so was born the payday loan. Bridging loans had become defunct as homeowners had hardly dipped into their overdrafts because of transferring credit at zero percent on cards, let alone needed a loan. In any case, the banks were saying no to just about anyone who applied for credit, other than those who had huge amounts of equity in their homes.

And does this seem like a history lesson, something akin to learning about the Victorian and Edwardian eras when you were at school? It may seem so, but when you consider that all this damage has been caused within this Millennium, a mere twelve years from trough to peak to trough, it is easy to see how money in irresponsible hands can lead to a lifetime of financial pain, as many individuals will confirm.

Pay day loan dependence has not grown out of greed by one institution or by the failing of another. It is the dizzy affects of having cash when you’re not used to it that has caused the problem we see today.

On a smaller scale, there is a very definite lesson to be learnt when applying for a payday loan. Only lend what you need and if you do find yourself with extra, pay it back, as many wish they had done with surplus cash they had from remortgages – everything has to be paid back, eventually.

According to the professional services orginsation’s latest ITEM Club report, personal, commercial real estate, and SME customers will bear the brunt of the market contraction, and may have to rely on alternative corporate funding vehicles such as no credit check payday loans as a result.  Meanwhile, with bank lending growing more paralysed, this opens the market up even wider for so-called ‘shadow’ banking, alternative lending facilities at both the high and low ends of the market.

In addition to the rise of payday advance lenders, the ITEM Club also predicted that the Financial Transactions Tax would impact the UK financial sector to the point where it would be contributing approximately 60 per cent of total revenues, even if the UK were to opt out of FTT.  The total contraction of bank lending is expected to be 2.2 per cent this year, with only 0.9 per cent growth predicted for next year.

Ernst & Young ITEM Club’s senior economic adviser, Neil Blake, said that bank deleveraging could impact the economy in a serious manner, and has been issuing warnings of the possibility for some time.  However, Mr Blake said that this will be the first instance of an annual total loan contraction since the immediate wake of the global financial crisis in 2009.

Corporate loan rates are expected to contract by a significant amount, with 2012 levels to drop by 5.7 per cent.  The real estate and construction sectors may be likely to face particularly tight financing conditions.

PwC indicated that consumers turned away from high street banks and credit card companies due to their bad credit rating have been more or less forced to explore the option of the payday loan as a last resort when they’ve needed an emergency cash injection. However, this has inadvertently helped both the borrower and the lender raise their profile: the borrower improving their credit rating providing they pay back as and when agreed and the online lender through raising their brand recognition.

As PwC commented, the payday loan market has always been associated with individuals and families at the lower end of the earnings bracket, but the appeal of the convenient, no credit check loan companies, with their ease of access online and ability to transfer funds at a swift rate of knots, is now spreading far beyond the low-income sector

It is this convenience coupled with the innovation shown by the payday loan market leaders that is attracting customers from a much more prosperous consumer base, not only from individuals but from small businesses, too.

As firms become more wary of their cashflow, investments in stock, even for one-off orders, have to be considered. If there is a payday loan available that, knowing the total cost of finance in advance as is now a lawful attribute for online lenders, they can build this directly into their costs and perhaps take orders they may otherwise have shied away from.

Payday loan firms have been in the news for all of the wrong reasons, lately, mainly due to no fault of their own, rather the plight of those who have borrowed irresponsibly have had their self-imposed circumstances used as a stick to beat the industry with. This, however, has had the positive effect of tightening up online loan regulations directly leading to this interest from a sector of the UK one may never have assumed drawing upon this type of facility.  Every cloud, eh?

More on The Guardian/PwC report tomorrow.

According to PwC, payday loan companies could eclipse credit cards in popularity, becoming a mainstream borrowing method within the UK.  The sudden explosion of borrowers seeking payday advance lending can be traced to an inability to rely upon traditional lending, such as credit cards.

However, payday lending, which has up until recently been the purview of low income earners with higher risk profiles, the innovation and convenience offered by these loans have worked to attract a more prosperous and broader range of customers, with traditional High Street lending suffering as a result.  PwC director, Simon Wescott, remarked that while payday lending may have initially been seen as a ‘last resort’ loan, mainstream lenders need to realise that an increasing number of customers are pleased at the innovative and convenient service provided to them by these more agile and smaller lending providers.

In fact, Mr Wescott predicted that payday lenders are likely to make further forays into the financial market by offering more conventional products with longer loan terms such as credit cards.  The PwC director also said that current accounts could be in the future for payday lenders as well, something that could be seen as a serious threat to the ‘Big Five’ high street banks that currently hold 80 per cent of the current account market.

While many lenders have been under fire from detractors for allegedly targeting classes of borrowers by purposely encouraging them to take out loans that would be beyond their means to pay, consumers with economically-linked anxiety find the limited size and length of payday lending appealing, said Mr Wescott.

According to Steve Rees, who is the managing director of Vincent Bond and Co. the number of people resorting to using instant cash loans services at present is at least three times the number before the financial crisis hit in 2006 according to research carried out by his company in a recent survey.

He says that too many people who get into debt seem to try and solve their problems by taking on more debt far too quickly rather than searching for another way out. He said further that taking out short term loans under the present high interest rates for too long would be “fraught with problems”.

He said that the term “loan shark” was well deserved and served to warn people of what could happen if they were unable to repay their instant cash loan in time. “The shark’s teeth would bite down hard”, he said and the long term effects on the borrower would extend further than just affecting one’s credit rating.

Research has shown that a large majority of those in serious debt have incurred it during the last few years.

The most effective solution, it appears, to serious debt problems was bankruptcy. Over 90% of those people who had been surveyed said that it was an effective end to their debt problem. IVA’s and DMP’s were also considered very useful ways of solving debt problems. The survey showed that the majority of people who tried to solve their debt problems by themselves, usually by applying to one or more payday loans companies for a series of short tem loans, suffered the worst.

Rees said that declaring bankruptcy should be a last resort for most people as getting a bank account afterwards would be quite difficult and one’s credit rating would be seriously dented for at least five or six years. He said that it was better to pay a debt consultant to help manage debt or, if that can be done, seek out a free debt consultant.

Getting a payday loan on your smartphone has been a bit tricky to date if you’ve had anything but an Android service, although by no means impossible if you traipse through the usual Google search route. However, transmitting the sensitive information that you’d need to in order to secure a quick cash loan injection through someone else’s wifi connection may not have been desirable.

But now, if you own a tablet, you can download an app that takes you straight to your own personal finance information that gives you real time perspective to what’s happening with your cashflow, literally at the tap of an app. This could be critical for people who have to make real time decisions about cash and find out that they need a payday loan or other type of short term finance at super quick speed.

The new app is now aligned with 12,000 different financial services, more than double the previous amount. And rather than have the look and feel of a spreadsheet, the design of the base Quicken software from Intuit has a feel more like handling your music than your finances. In a similar way that you can arrange your audio files by album, artist or rating, you can now sort your finances by due dates, amounts in or out and who to or from.

The reason many people start to slip into financial trouble is because of the unexpected bill that takes you into unauthorised lending, the charges for which can mount up to a lot of money very quickly. With the new app, one daily check to see what your balance is and what you’ve got going out using the projected budget facility can help you identify well in advance when there will be pitfalls. The app won’t give you the money, but you can set your reminders to minimise the time you’ll be needing the quick cash injection, therefore reducing the interest you’ll have to pay on it making online payday loans even more value for money.

The time was right for this app, as the software firm believe that there will be a definite shift to tablets, with 40% of the mobile market projected to be favouring this platform in the coming months. So, yes, there really is a tablet to help you sort out your financial headache after all.

]]> http://www.paydayloans.info/2012/02/06/a-tablet-to-help-ease-your-financial-headache/feed/ 0 http://www.paydayloans.info/2012/02/06/disreputable-loan-providers-under-fire-from-watchdogs/ http://www.paydayloans.info/2012/02/06/disreputable-loan-providers-under-fire-from-watchdogs/#comments Mon, 06 Feb 2012 06:00:22 +0000 Payday Loans http://www.paydayloans.info/?p=887 Disreputable providers of payday loans have encountered withering fire from watchdog groups recently for using dishonest and misleading tactics, including promoting instant cash loans as an excellent way to raise some extra money for things such as cosmetic surgeries and shopping trips.

Many providers of no credit check payday loans follow responsible lending practices.  However, many less scrupulous lenders have been deliberately targeting certain classes of lenders, such those that target women by featuring colourful adverts depicting shopping trips while others tout their loans as excellent for generating the cash needed for cosmetic surgical procedures.

While payday lending has long been accused of nothing better than legal loan sharking, economic experts say that the short term loans provided by payday lenders are invaluable for those who encounter a sudden financial emergency in between pay period.  However, since these loans are unsecured, interest rates can be high, as evidenced by APRs upwards of 1,000 per cent, and penalties for missing a payment deadline can be quite high.

However, industry experts point out that since payday loans are designed for the short term – typically a month – using an annualised rate such as an APR will result in massive rates sometimes as high as 4,000 per cent.  The true cost of repaying a loan is typically around £10 to £30 per every £100 borrowed, experts insist.

Reputable lenders will make sure that their borrowers are aware of all the risks of taking out payday loans, and will provide them clear and concise information regarding the efficacy of such loans in the short term.  However, a growing trend with unscrupulous lenders has been to figuratively widen their net by enticing borrowers to take out loans for more than simply emergencies, encouraging them to use the loans to make frivolous purchases with little thought to the consequences facing them when it comes time to repay the cash.

The new rules cover many providers of high interest credit in addition to the short term loans provided by payday lenders.  Measures such as banning commission payments for the sale of store cards by shop staff and delaying benefits such as discounts for at least a week after a store card is taken up by a consumer were put into effect, as well as those to aid customers facing financial distress, particularly customers with mental illnesses and her mental disabilities.

Lenders are now required to increase the transparency of their loans in regards to costs prior to approving a loan, including the reiteration of the fact that payday lending is ideal for short term borrowing but is decidedly inappropriate for longer term needs.  Payday lenders are also now restricted to extending or ‘rolling over’ short term loans more than three times, and the new regulations require that new credit assessments be carried out each and every time.

While all fifty members of FLA that operate within the consumer credit markets are bound to follow the code, critics say that it will do little to curb the rise of underhanded payday lenders that ruin the reputation of those operating more responsibly.  This is because there is only one major payday loan provider within the FLA, with three quarters of the market instead under the aegis of the Consumer Finance Association.

If you’re looking for instant cash, let me tell you now, express cheque clearance no longer exists at your high street branch! The only thing the clerk could offer was a service that you, paying customer, could stump up for that would confirm if there were funds available in the payee account so there would be no hitch; you can, however, no longer pay to get your cash any faster. Amazing. No wonder, when people need cash in a hurry, they turn to payday loans online.

The customer in branch didn’t like that answer, not one little bit. From her demeanour, she looked like the type of person who was used to getting what she wanted and wasn’t about to change the habit of a lifetime, now.

Said customer then went on to ask bright-faced clerk about a ‘bridging loan’. Silence met the question. Overhearing this, one of the more senior members of staff came to the other side of the counter window alongside bright(er)-faced clerk, who was obviously in need of a hand with the terminology.

As it transpires, the bank did offer an instant decision, immediate cash advance loan, but the minimum amount was by far in excess of what said customer was looking to borrow and she was almost mortified when senior clerk mentioned that the application should all be dealt with online, via their online personal banking system.

It also seems that some customers are more equal than others and your interest rate may depend on your creditworthiness and the bank’s assessment of your ability to pay. Grumbling, said customer (who’s used to getting what she wants but this time so didn’t) turned quick-sharp from the counter, ne’er to be seen again (well, not whilst I was there, anyway).

If said customer had been approachable, I would have taken the time to tell her about payday loans. Being of a curious nature, I checked out the facts and figures myself when I got home. For the amount the clerk quoted to pay for the ‘express’ cheque clearance that isn’t, or a loan for the minimum amount (based on my credit rating; I cannot vouch for said customer’s), a payday loan that I could have ‘within the hour’ and pay back within a few days because I knew that the cheque would cover it, cost a lot more from the high street (forget APR, I’m talking actual amount of hard cash to repay) than it would have done had I taken out a payday loan online from any one of a number of short term loan providers.

So, when you see an advertised high street rate of 6.9% and then get the shudders when you see an online payday loan APR of 4,214%, do not make the assumption that you will pay back any more for the latter (providing you stick to the terms you set) than you would at one of the ‘big four’ banks. Here, my friends, endeth the lesson.

The payday loans companies are operating out of high street offices that look bright and cheerful and just like a café or estate agent’s office. Anybody walking past and looking inside would see young women, and some men too, sitting on comfortable looking chairs, flicking through magazines as if they were waiting to see the dentist.

The payday loans industry is doing very well in this country, it seems partly explained by particularly lax regulation and the effects of the recession. It’s harder to pay soaring rents and cope with inflation while, at the same time, traditional ways of getting a loan have become more difficult.

It seems as if the payday loans companies are spending considerable amounts of money on advertising, a lot of which is aimed at young, working women.

The companies have adopted quite smart marketing tactics in order to target this particular sector of the population.

Popular soaps and reality shows on TV seem to have attracted advertising time by some of the better known payday loans companies. Wonga, for instance, has spent nearly ten million pounds on TV advertising, which includes time around the finals of the X factor.

Quickquid has been advertising in and around such popular soapies as Desperate Scousewives and Friends. Neither Wonga nor Quickquid admit to targeting young women but it appears from their marketing strategy that that is exactly what they are doing in practice.

Some short term loans companies like the Money Shop hand out attractive colour magazines which are full of pictures of pretty young women all smiling at the loans they have received so easily. Oakam ran a beauty competition, during which they gave out information about its Bonus Loan, which attracts a meagre 300 percent APR.

Other companies have easy to use and glamorous websites where their loans are advertised. Many young women interviewed have told stories of how easy it was to apply for a loan online, then receive it a few minutes later deposited in their bank account. Paying back the loan with the added high interest charge was not quite so fast or so easy.

It’s important to choose a payday advance lender that has a good reputation and that you know you can trust with your personal details, as well as one that offers you the best deals on short term loans.  With the economy being what it is, payday lending has become incredibly popular, but with this popularity comes the inevitability that disreputable lenders will try to capitalise on the trend, making it even more important to select a high quality lender.

If you find yourself in need of a payday advance due to an emergency financial situation, then you may feel the urgency of getting that extra cash as quickly as you can, and perhaps rightly so.  However, experts say that you’re only doing yourself a disservice by not taking the time to select the best lender for your needs, and as a great many lenders will allow you to apply for a loan in just a few minutes over the internet, you can afford to take some time in comparing one to another until you find one that you feel you can trust.

The application process for payday loans online is typically around 20 minutes long.  Provided you meet lending requirements and you fill out the application properly, you can have your money directly deposited into your bank account in as little as an hour, especially since many lenders no longer have any requirements to provide faxed copies of documents before providing you with your much-needed funds.

Steve Rees, the managing director of the debt management specialists, explained in a recent interview how the number of individuals seeking short term loans has risen dramatically since the global economy started to nosedive in 2009. For those who are experiencing financial difficulties, seeking payday loans can sometimes seem like the only option available to them.

People who turn to online loans often see them as a last resort as they have been refused credit on the high street and elsewhere and, although nothing like a loan-shark agreement as Rees alludes, he correctly points out that payday loans are not a solution for long term debt resolution.

The interview itself was in conjunction with a recent report that suggests record numbers will be flocking to the Internet over the next six months to help secure a quick cash advance to tide them over until the next payday. As a comparison, people in the UK took out 1.2M loans of this nature in 2009. The results of recent research suggests that 3.5M will do the same in the first half of this year.

Dealing with your finances can be a headache for some people, in as much as facing up to the fact that they’ve got a cash flow problem is an admission many of the UK’s proud individuals do not want to make in the first instance. However, if used correctly, payday loans can get you out of a tight spot when most urgently needed. It is the people who become reliant upon the service and end up spiralling into debt, some times through no fault of their own but more often through bad debt management, that are the cause of concern for industry watchdogs. However, any sort of finance can leave a nasty taste in your mouth if you find that you are suddenly out of work or overtime (remember that?) is cut, not just payday loans.

Unlike IVAs and DMPs, payday loans can actually have a positive effect on your credit rating. Once you have taken out one of the former two options, you have more or less burnt your bridges as far as securing any type of credit in the future goes. If you’re yet to get your foot on the property ladder, that is one ‘credit scar’ you could do without.

To be fair to the short term loans industry, their own representatives have been keen to show willing in the attempt to make the activities of their members more accountable. The FLA (Financial Leasing Association) for instance has proposed that the number of payday loan roll-overs should be restricted to no more than three in future, while the CFA (the Consumer Finance Association) has called for more transparency from the instant cash loan sector.

However, these moves have been dismissed by social welfare campaigners as too timid and have pointed out that Britain has far fewer restrictions and regulations than many other countries such as the U.S.A. and Australia.

Campaigners for consumer rights have stressed that the rule changes proposed by both the FLA and the CFA do not go far enough to offer sufficient protection to their potential customers.

Stella Casey has been campaigning for a limit on payday loans and thinks that rules about extensions will do nothing to relieve the pain that these loans cause in the community. She has pointed out that in the U.S.A. when roll-overs were restricted, borrowers simply closed down one loan account and started another one. She also said that it might work only if there was a ban on anybody taking out another loan for, say, a month after the roll-overs ceased.

A prominent counselling advice service has said that it would be better to prohibit any roll-overs at all. They say that one payday loans company, “Dollar Financial”, owner of one of the major British payday loans companies, operates in Canada and is agreeing to a prohibition on loan extensions in Canada while promoting them here.

A lot of the criticism of payday loans practices has come from the huge interest rates that are charged and the dubious efforts to extract debt repayments once they have been incurred.

1.2 million individuals in the UK availed themselves of payday loans in 2009, with a sum of £1.2 billion in total lending sums.  3.5 million Brits alone are expected to take out one of these highly popular loans over the next six months, research also said.

Vincent Bond & Co’s managing director, Steve Rees, said that payday lenders have become increasingly ppular since the beginning of the recession in 2009.  However, attempting to manage massive debt by taking on more through the use of payday lending can lead to many types of problems, Mr Rees cautioned.

Using payday loans as long term solutions for debt can make matters much worse, the debt advice firm’s managing director also said.  He did say that illegal loan sharks are even worse, as damage to your credit score could be the least of your problems if you fail to make a repayment.

The research findings also demonstrated that job losses are leading many to fall into debt.  One of the firm’s clients reported that he had to relocate in order to find work after being made redundant during the recession, but as his new job paid less than his old one, his debt levels began to increase to unmanageable levels.

The research study also discovered that bankruptcy was rated as overwhelmingly effective in regards to finding solutions to problems with debt, as a massive 93 per cent listing the solution as a successful one.

The loans, lent in good faith, are due to be paid back imminently. The issue, according to a recent report, is that almost a half of the students who have taken out such loans (45%) are either untraceable or have already fell into arrears. That leaves the financiers with some tough decisions as more and more students are applying for similar loans to fund their studies in this country.

The courts are hardly proving a viable way to recapture the money, either. Sky News requested the figures on the loans from the government under the freedom of information act and were duly obliged. There is no suggestion that the government tried to keep these loan figures under their hat, but if they had, it would be no surprise given the backlash payday lenders felt after the scandal of high interest rate loans offered on a short term basis to UK students earlier this year.

Higher education loans have been on offer to EU students wishing to gain their further qualifications in the UK since 2006. With the suspended repayment dates, the hope has always been that students will contribute back to the system once they start earning – but that is based on them getting jobs in this country. Should EU students return to their homeland once they finish studying at UK universities, the loan company relies entirely on their good will to start making the repayments. Are we starting to see the possible flaw in this ploy, yet?

To date, 9,000 foreign students are not coming forward with the repayments, leaving the UK taxpayer with an outstanding bill of £20M! Of that astounding figure, just £8,000 has been returned to the kitty after being pursued through the avenue of the courts.

The total debt of the 19,000 EU graduates to date stands at a staggering £47.4M. At current pay back rates, the UK economy could look forward to a return on their investment of almost £20k; however, investments usually cater for the return of the original stake as well as the premium to make it worth while.

I think it will be a cold day in hell before we see this payday returning a profit.

The number of short term loans and instant cash loans companies has sky rocketed in Britain over the last two years and the effects of payday loans and short term loans with very high interest rates on borrowers has been high on the agenda for debate in all of Britain’s regional assemblies and the House of Lords recently.

There has been criticism of Britain’s lax legal attitude towards such companies and a feeling amongst some of the country’s social welfare organisations that companies have been particularly targeting the vulnerable in this country because their businesses have already been regulated and restricted overseas.

Now, the two organisations that have most to do with the regulation of payday loans in this country are beginning to act.

The FLA (Finance and Leasing Association) has already rolled out a new lending code for short term loans providers which will limit them to a maximum of three extensions of a loan. The criticism here has been that some payday loans companies have been deliberately encouraging borrowers to extend their original loans each month, driving them further into debt with interest rates topping the 1000% mark and more for many of the loans.

The Consumer Finance Association is working with the eight largest payday loan companies to bring in a new code of practice for the industry. This will nit only involve a restriction on the number of roll-overs possible but will ensure that there is much more transparency in the advertising of loans.

The criticism that has led to this particular focus is that much of the advertising of payday advances and instant cash loans has included terms that are more designed for bank overdrafts, with APRs and EARs being quoted. The idea of the CFA is to design the information available to lenders so that they know exactly what they are borrowing and what they have to pay back in cash terms after each period of lending, typically a month.

Crewe households may also be taking up payday loans as a way of coping with debt in an irresponsible manner, as these short term loans are not a sustainable way to deal with long term debt levels that now stand at an average of £23,177 per family.  This sum is much higher than other areas in the south, such as Reading, Tonbridge, and Oxford, and research indicates that the high cost of living is the source of the debt, not the cost of luxuries.

Critics of the no credit check payday loans industry have wasted no time in blaming lenders for increased debt levels in Crewe by stating that these payday advance providers are targeting the area.  The Cheshire Neighbours Credit Union’s chief executive, Julie Williams, accused lenders of increasing the amount of advertising they do at peak television watching time, which draws people into a spiral of debt repayments they cannot afford to make.

Ms Williams said that the most alarming thing about the Crewe area is that there is not a lot of spending occurring, as the number of large screen televisions and driveways with two cars is decidedly low, leading her to believe that people are simply ‘borrowing to live.’  However, a number of debt advice agencies located in South Cheshire have come forward to help those in need by offering help, such as Christians Against Poverty charity which recently opened a debt centre at the West Street Christian Fellowship in Crewe.

CAP spokesperson, Tim Oakley, reported that demand for aid in the area has already been high, even though it has just been two months since the debt centre opened its doors.

Do the FLA not keep up with technology? Here’s the scenario:

• You’re in a store, but cannot now take out a store card on the spot to purchase the item you like.
• What you do have is an app phone. With the Internet. Where payday loans companies live.
• See where we’re going, yet? Maybe the FLA can’t, or don’t want to.
• In shop. Take out payday loan.
• Buy goods.

As the purchase is now with cash that can be in your account extremely quickly, the bargain is even more incentivised because you now qualify for a discount, denied under the new rules with new store card applications.

• Pay back loan when paid.
• Job done.
• Two fingers up to the FLA and store card lenders, now totally cut out of the loop, pushing more business into the coffers of the quick cash advance lenders online.

However, because of the fact that the item may not be worth as much as the minimum loan amount you have to take out with a payday loan lender,

• there may be a surplus of cash left in the customer’s account.
• Do we think that will stay put until the loan has to be repaid, or
• will it go on a bag and shoes to match the initial outfit, which may not have been possible if the store card had a lower credit limit for intial transactions?

Will borrowers be put off by the stigma of going to a payday loan company?

They said that consumers would be put off online dating, because of how it was perceived; ironically, like pay day loans, another once frowned upon industry, now similarly worth £2bn a year, doing very nicely off the back of members of the public who seem to stop at nothing to get what they genuinely want.  Starting to sound familiar?

There are measures in place within the new FLA Lending Code affecting short-term lenders, too.

The total repayment cost of any loan must now be made clear to the potential borrower before they make their quick cash advance loan application.  Also, the suitability of the advance must be advised by the lender that it is recommended for a short term loan period and not intended or suitable as a long term debt solution.

There will now also be a limit imposed upon the number of times an extension can be applied to the original loan repayment date. Customers will now only have a maximum of three roll over periods to repay the loan in full. This will cap the amount of times the interest can be added, but where does the payday lender go if the repayment is not made on the third attempt? Take the money from the lenders account anyway and leave them to sort the mess out with their bank? Yep, that sounds like the best solution all around, as unauthorised overdrafts can be more expensive than the amount repayable on payday loans.

The new code also states that a new credit check is to be carried out every time an extension is applied for. What happens if it is a payday loan that does not insist on credit checks or the customer’s credit was good when the loan was applied for, but has faltered since? Again, refuse the extension and take what they’re owed anyway?

The new code also now extends provision for those who experience financial difficulty. It seems the FLA are creating their own new market, there, rather than concentrate on individuals who are in existing deep water without having these further limitations imposed. If these measures are supposed to encourage ‘responsible lending’, I’d hate to see any guidelines for letting the state of the market get further out of hand.

The new rules, which will be known as the FLA Lending Code, have been introduced as a measure that, the FLA claims, will protect consumers who are already in financial difficulty. Presumably they mean by making it a nanny state, they are not allowing the public their pocket money because they’ve been a naughty boys and girls in the past.

Just reading through the proposed changes to the law, they may be legal but there is a large section of society going to lose out in this new legislation, all because of the irresponsible actions of a minority of people who are stretching beyond their means, as they know only to well, when they take out a quick cash advance or pay day loan.

The one amendment that sticks out straight away, which will directly take money out of the pockets of innocents who have no choice but to offer store cards for big branded shops’ clients is the amendment stating that shop staff can no longer earn commissions from the sale of such accounts. Do the FLA think that this will stop the shop owners from forcing their staff to offer the store cards? Of course not. It’s just that they won’t get paid for that aspect of the job. Is that ruling not a violation of human rights?

However, as the suspension of use of a store card will now be an automatic seven days from application date and also no discounts or sales promotions in direct conjunction with a product that may be on offer with a new application can now be applied to the sign-up transaction, take-up rates for store cards may soon see a very quick decline; especially given that interest rates tend to be unattractive (not quite as high as payday loans, but greater APR’s than high street lending, by far) and owe much of their populaity to users of their store’s credit facility who could probably afford to pay their bill anyway, but just like having a top-notch store card in their purse to prove their status.

The only losers will be the staff, as those denied store credit can and will turn to quick cash advance loans via other means (explained in next up, Store cards loss is payday lenders gain.

The no credit check payday loans industry will soon be subject to a new code of conduct by way of the Finance and Leasing Association aimed at limiting the number of roll overs that can be granted to a borrower to no more than three as a response to high levels of pressure from consumer groups and the government.  However, detractors say that since the FLA has only one payday lender within its membership, more must be done to protect consumers.

The new regulations covering short term loans are viewed as a step in the right direction by Labour MP Stella Creasy, who has campaigned for the introduction of a cap on interest rates charged by payday lenders, but believes that the limitation of roll overs does not go nearly far enough to make a difference.  The MP pointed to payday loan regulations in the US, where limiting the number of roll overs leads to borrowers simply paying off the loan and then taking out another loan immediately, and that the only way a roll over limitation would work is if there was a time limit of around a month in between loans.

The Consumer Credit Counselling Service, a debt advice charity, said through a spokeswoman that it would rather see lenders no longer permitted from rolling over loans at all instead of an arbitrary limit.  The spokeswoman also said that some payday lenders that operate both in the UK and abroad have agreed to similar regulations in countries such as Canada.

The industry body, which acts as a representative for around 50 firms that offer both motor finance and consumer credit such as instant cash loans, have said that payday lenders need to use more transparent methods when it comes to informing consumers with the cost of borrowing.  The FLA also wants payday lenders to limit the number of roll overs it permits its customers to no more than three and to offer reminders to borrowers that these loans are not suitable long-term borrowing solutions.

The FLA’s consumer finance head, Fiona Hoyle, commented on the new guidelines, said that a credit assessment should be carried out properly each and every time a roll over is taken up by a borrower, and only after he or she has specifically requested one.  This roll over cap is an essential part of the new FLA code, she added, as the changes are designed to institute more stringent standards for responsible lending.

The FLA is not the only industry body that is overhauling their operating standards.  The Consumer Finance Association, an organisation which represents nearly 75 per cent of the entire payday lending marketplace, also recently reported that it was currently hard at work on enhancements to its code with the help of other trade associations and the Department for Business Innovation and Skills.

John Lamidey, the CFA’s chief executive, disagreed with introducing a roll over cap, as it would only act as a detriment to consumers by forcing them to look for financing from alternative lenders until reaching their limit.  The new CFA code is set to launch later this year.

Mr Lamidey said that the roll over cap is being pushed by activists and politically-motivated critics, adding that while it may not be in the best interest of consumers to do so, the CFA may have no choice but to bow to the pressure being exerted upon it.

Payday loans are usually short term loans which are given out for limited periods to people who have urgent cash needs like rent or mortgage payments. Most companies charge comparatively high interest rates on the loans – anything up to 4,000% per annum and some of them do not ask for credit checks. The companies, which have been growing in number over the last two years have been criticized both for the high interest rates and the lack of credit checks, which it has been claimed by critics, leads some people even further into debt.

Wonga, which signed up for the new roll-over curb last Wednesday, charges up to 4,214 % for some of its loans. This means that if a person takes out a loan for one hundred pounds for a month would have to pay back about forty pounds at the end of the period. The new curb will prevent anybody being able to extend the loan more than three times.

Wonga is currently the only payday loans company which is a member of the FLA, which is the association that has brought in the restriction. Other short term loans companies belong to other credit associations or to none at all, but may soon have to follow suit.

Both the OFT and the BIS are having a long, hard look at the practices of short term lenders and may bring in compulsory restrictions on their activities.

Some of the criticism of instant cash loans companies, especially those offering no credit check loans is that they have been encouraging borrowers to roll over their loans month after month, getting progressively more into debt.

This trend has become a cause for concern to some payday advance industry critics, as they say major lending firms have embarked on expensive television advert campaigns, spending millions to purchase air time during programmes such as Friends and Glee.  Other lenders have set up online websites in order to target women specifically, and these experts say that language on the sites stresses the ‘socially acceptable’ nature of taking out such a loan.

Anti-debt campaigner and Labour MP, Stella Creasy, is one of the largest payday industry detractors.  Ms Creasy said that women are ‘falling prey’ to payday lenders.

These women, who have a regular income and are working, are able to repay a portion of their lending, she added.  However, women are subsidising these lenders through paying for extensions and penalties on any unpaid portions of their loans, Ms Creasy also said.

Women seem to be nearly as likely to be saddled with heavy debts as their male counterparts, according to a recently published report from RSM Tenon.  The accountancy firm found that out of last year’s insolvencies, women made up 49 per cent of the total figure.

Ms Creasy has called upon the government to more tightly regulate the payday lending industry by both instituting a cap on payday lending interest rates and to offer alternative forms of credit for those with financial vulnerabilities.

In order to get Americans back on track, one advert for a debt settlement firm has proffered the top five mistakes that individuals make when they think they are helping to solve their debt crisis but are actually making it worse. Strangely enough, four out of those five mistakes could be partly, if not totally, eradicated with the help of payday loans. Perhaps, conversely, the problem would not be so bad if they had, in The States, access to as many online payday loan providers as we do here in the UK.

The first recommendation is to stop paying just the minimum requirement on your credit card bill as you are eating into your actual debt by very little doing this. Even worse is to miss a payment, altogether. The interest accrued by missing a payment can be more than the one-off payment due on a short term cash advance.

They also suggest leaving friends and relatives out of the equation, which is excellent advice. Not only could lending money ruin relationships built up over a lifetime, but also the temptation is not to pay it back at all as ‘they will understand’. With a payday loan, the amount and dates are set, so you not only guarantee making that payment but you start to regain the habit of making regular commitments to solving your financial issues.

Using debt consolidation where the loan you are taking out to put all of your debts ‘under one roof’ has a higher APR (because of your credit risk) than the majority of the individual loans you have taken out in the past may make repayments more convenient but is actually increasing the amount you owe, rather than reducing the debt.

One of the reasons may be prevalent in the US, but perhaps not so in the UK and that’s to pay a cash advance to a ‘debt counsellor’ who only makes matters worse by having it away with the sum you’ve managed to scrape together for their never-appearing services. Online payday lenders do not charge a fee for their service upfront but make their money on the agreed level of interest set at the time you decide how much you want to borrow and over what period you want to repay.

And the last no-no on the list is to declare bankruptcy. It may seem like the only viable option, but the long term effect on your credit rating is often irreversible. On the contrary, regular on-time payments towards a short term or payday loan can repair your credit history.

The industry body, which has been promoting the uses of credit unions in lieu of payday loans, revealed through its Household Income Tracker survey that fuel bill increases have led to a high number of people in Northern Ireland to turn to instant cash loans from moneylenders in order to make ends meet.

The League conducted a survey of more than 500 people how household income drops have taken its toll on them, discovering how the typical NI consumer has to pay around £131 every month on fuel.  As a result of these cost increases, the League claimed that in excess of 100,000 people had to take out short term loans in order to cope with other outstanding monthly bills.

Irish League of Credit Unions spokesperson, Rosemary O’Doherty, remarked that it was abundantly clear that people in Northern Ireland have the expectation that they will experience new financial pressures in 2012.  Ms O’Doherty expressed particular concerns that so many have turned to payday loans and other sources of what she called ‘high interest’ credit.

According to the League’s research, one out of every four who took out payday loans did not have the ability to meet their repayments in a timely manner.  Moreover, around 12 per cent of all adults in NI – around 170,000 people – have no money left over every month after paying their bills.

A recent report highlighted that 7% of people who took part in the debt snapshot survey carried out by the R3 plan to take out payday loans in the near future. As the survey was a representative 2,005 people, the actual size of the market in the next six months has been predicted to be 3.5M customers, who may then go on to incur ‘roll-over’ debts or return for further finance if they find the loan service suits their needs. Another report carried out by the CFA, payday lenders’ monitoring body, suggests that over 90% of people who have taken out payday loans agree that they were happy with the service they received.

This begs the question: why are MPs channeling their energies thus, when such a large portion of the respective market place are happy with the product? Especially as the Mirror article suggests 86% of people who use payday loans put bread and water on the table with it. Is Ms Creasy trying to take food of the UK’s table? Her opposite numbers in power seem to be doing a good enough job of that on their own, as the size of the payday loan market suggests.

For Ms Creasy, trying to make the financiers who ‘bankroll’ the cash advance lenders withdraw their capital from such a proven way of making fast, legal money with such an eager, primed market place (in the main, payday borrowers forego the unpleasantry of invasive credit checks, as do those with £3M pounds worth of assets, creditworthy or not) is going to take some persuading.  Yeah, good luck with that, Stella.

And the Mirror article also suggested that Stella Creasy, once satisfied she’s done all she can with the financiers, will look to see if any of the UK’s ailing pension funds are in anyway connected to some of the firms who bankroll the payday loan sector.

I put it to you now, given the evidence of the current £2bn payday market in the UK, which is forecast to only grow as austerity measures cut deeper into the household budgets of those who are least well off – which seems to be the average working-class family, whoever takes the reigns at No 10 – if you had a pension fund that has seen decrease upon decrease in recent years, would you mind if your fund managers gave it a couple of years in the payday loan sector to try and redress its ever-decreasing balance?

With nearly every other market in world economy under one threat or another, I can think of no safer place over the next couple of years than being looked after by the payday lenders’ banking group, can you?

The debate about the effects of the short term loan industry on indebtedness amongst Britain’s population was debated in the House of Lords recently and Mr Miller-Cheevers has supported the campaign by the Labour Minister of Parliament, Stella Creasey to cap rates on products like those sold by Mr Miller-Cheevers’ company.

The effects of the growing success and expansion of payday loans has been noted by the Debt Advice Foundation who have said that ten percent of those people who have applied for an instant cash loan did not really need one. The Foundation goes on to say that those people who take out short term loans for things they really don’t need are not helping themselves in the long term and can quickly get themselves much further into debt. The Foundation advises such people to get help with improving their debt reduction skills.

There has been considerable debate and concern over high cost credit loans with charities and trade organisations expressing their worry that this type of product can drive lenders into an ever deepening spiral of debt if they use the loans incorrectly.

Mr Miller-Cheevers said that loans could be expressed in a different way from what they are now, which he thinks can be misleading and leads to confusion. At present, payday loans are usually stated using APR and EAR. As Mr Miller-Cheevers says, these terms are normally reserved for products like overdrafts. He thinks that the loan repayments could be more simply expressed in direct monetary terms.

He went on further to say that this type of short term loan should be more transparent. He said that the term EAR stands for an annual rate of interest, as used for a bank overdraft while an APR takes into account extra fees and charges which EARs don’t. He says that for payday loan companies to use these terms almost interchangeably results in customers being confused about exactly what they have to repay.

In the meantime, the new FLA code provisions include preventing borrowers from rolling their payday loans any more than three times, and will also ban store card sales commissions as well.  FLA spokeswoman, Fiona Hoyle, said that the industry body seeks to set the self-regulation standard for consumer credit, but the new code does not apply to any lenders that are not a member of the FLA – and many lenders do not have membership.

Missing from the new code provisions is a cap on interest rates, which is one of the main issues lender critics have been demanding, among other measures.

Stella Creasy, Labour MP, recently remarked that she has plans to place pressure upon venture capitalists in order to cease providing finance to controversial providers of short term loans, as some of these companies have been accused of preying upon low income earners and other classes of borrowers with high debt, such as the military and students.  Ms Creasy said that these cash loans carry APR interest rates as high as 4,000 per cent, though lenders say that the figure is misleading due to the short term nature of these loans, as they usually last only about a month and not a full year or more like traditional lending.

However, Ms Creasy insisted that the industry urgently needs to be reformed.  The MP also announced plans to investigate the major pension funds in the UK in order to determine if there are any links with firms providing capital to payday lenders that provide loans in an irresponsible manner to the nation’s financially troubled.

Many major payday lenders have been slammed in the press recently for appearing to entice students to take out loans.  Many of the online adverts of these companies encouraged students to avail themselves of a payday loan in order to finance a night out or using the cash to go on holiday, a move that has been swiftly condemned by honest payday lenders as irresponsible and predatory.

According to the Sunday Mirror, Labour MP Stella Creasy, who is under the impression that the short term loan industry has a dire and “urgent need of reform,” is looking into ways to break the chain between those who finance the payday lenders and the organisations themselves.

The crux of the brief Mirror article is the ‘sky-high’ APR rates applicable to payday loans; it fails to mention that a 4,000%+ APR rate stretched over a short term loan spell can very often be actually less than slipping into an unauthorised overdraft or the accrued amount of interest one incurs by skipping a monthly payment on the worn out credit card.

Wonga are coming in for criticism and the paper dropped their name into the article (twice), labelling them as ‘controversial’, but seemingly just as padding as there was no other substance or detail into exactly how the fresh-faced Ms Creasy is going to lobby the investment firms who prop up what is becoming an essential service for such a huge portion of the UK population.

Recent press coverage may start to serve as a warning to the company, though. If the media are going to start using their name to highlight anything awry within the short term loan industry, the long-term effects may be damaging for their already-tarnished image. Although one would have to question whether they have actually done anything wrong.  Immoral, perhaps; unlawful, maybe not.

The last thing the payday loan specialist want is to begin to become synonymous with the few irresponsible borrowers who flout the contracts they take out with payday lenders and then run crying to the media when their debts start to spiral out of control. Payday loans work well if they’re utilised properly, even helping to repair a poor credit history, providing that all of the criteria set out in the short term loan agreement are met.

article concluded 7am, Monday 30th Jan: Would you invest your pension in a payday loan firm?

Assembly members have asked the Welsh Government to promote alternatives to payday loans like credit unions.

Members also expressed concern over the easy availability of short term loans, citing how fast it was to obtain them using a smart phone or via website. A motion in the assembly noting the “excessively high interest rates” received cross party support.

Member of Assembly Simon Thomas, of Plaid Cymru, said that it only took 20 minutes for him to find a loan for four hundred pounds which incurred an interest rate of over four thousand per cent. He said that this demonstrated how dangerous this sort of instant cash loan can be.

The Welsh government was urged to work with councils and voluntary groups to promote alternatives to payday loans.

Representatives of the short term and payday loans industry have said in response to the debate that their companies provide a much needed service to a segment of the community and do not deliberately target the poorest as has been claimed.

John Lamidey of the Consumer Finance Association was quoted as saying that the payday loans companies are helping people on variable incomes. “They are not the same as lenders who go from doorstep to doorstep” he said. He went on further to state that the typical customers of payday loans tend not to be people on the lowest incomes. They are more typically on middle incomes.

The Consumer Finance Association represents the majority of the payday loans companies. The Office of Fair Trading in a recent survey found that a quarter of customers taking out these small loans were earning between fifteen to nineteen thousand pounds a year, while nearly thirty percent are earning over twenty three thousand pounds a year.

The Citizen’s Advice Bureau said that while payday loans companies were an increasing concern, only a small percentage of those people going to their offices for advice on debt were taking out payday loans.
There will be an advertising campaign rolled out soon which will extol the virtues of credit unions, which are regarded as a safer option than payday loans.

The chief executive, Gary Miller-Cheevers, remarked that responsible providers of payday loans have no desire whatsoever to make the lives of anyone in the UK worse off, especially those of students or lower income earners that are already struggling with debt.  His words came on the heels of recent reports of loan providers seemingly targeting groups, such as students or the military.

Mr Miller-Cheevers called upon lenders to limit their activities to borrowers that have the ability to repay the loan without the risk of spiraling debt.  There are enough of these genuine borrowers, he added, that payday lenders surely do not need to plumb the depths of whatever minority group they choose to trawl through in order to line their pockets with ill-gotten gains.

The chief executive also added that his lending firm is managed in a responsible manner, stating that it will only lend to those with full-time jobs.  The firm also restricts its lending to a level that would be affordable to repay according to the borrower’s pay rate, Mr Miller-Cheevers also said, commenting that even with all these safeguards in place, his firm still declines as much as 90 per cent of loan applications.

In addition to his recent words condemning the practices of shady lenders that prey on the less fortunate or less financially savvy, Mr Miller-Cheevers has also stepped forward to voice his support for MPs who have called for short term borrowing interest rate caps as well.

That’s roughly seventeen percent of people in debt only having enough money to pay off the interest on their loans, store cards and credit cards and never actually impacting upon the amount they owe. What has some bodies worried is that the minimum payment is never quite enough to cover the actual interest so, instead of people actually clearing their debt by paying the least that they are contracted to, they are sinking further into debt, rather than getting out of it. With budgets that tight, it’s no wonder payday loans – often where no credit check is needed – are the only way that people who’ve spent up to their limits in the past can actually have a life. Hence, we have the term ‘zombie debt‘.

There are, as you would expect, two sides to the argument as to whether the actual consumers who’ve taken out payday loans vindicate the service the lenders provide, or not.

On the against side, which is the view Consumer Focus lent towards, the payday sector of the lending market are accused of having had opportunities to reform their practises to stop customers falling into ‘debt traps‘ yet have shown no evidence of doing so. The actual R3 report also suggested that more than two thirds of payday loan customers had turned to the sector as obtaining credit elsewhere was not an option. Consumer Focus also expressed concerns for vulnerable customers who were at the mercy of short term lenders who were being perceived as ‘flouting the rules’. That was not specifically represented by the R3 report, although they did concede that payday loans were ‘not the best way’ to tackle long-term debt problems.

In defence of the sector, the Consumer Finance Association who, along with the Office of Fair Trading, regulate and monitor all payday loan institutions, presented completely different findings altogether.

In contradiction to the sixty percent of customers in the R3 report who it is alleged regretted taking out payday loans, a recent survey by the CFA found that 94% of those questioned were happy with the service they had received after taking out bad credit loans in this manner.

They were also quick to act upon misleading advertising by Wonga at the turn of the year when they were, rightly or wrongly, accused of targeting students with one of their online marketing campaigns. The OFT objected, Wonga apologised and capitulated, end of story.

And with regards to practises, the payday lenders could not be found at fault by another OFT investigation and were abiding by the terms and conditions the sector set out which are governed by the FSA.

In conclusion, it is safe to say that any survey can be created in such a manner that it will produce the answers the questionnaire’s sponsors are looking to find (the people who designed them would not be hired again, otherwise – the ‘Food Pyramid’ is perhaps the best-known example).

It is also safe to say that, providing payday loans are used for their purpose and repaid on the agreed date, they can often be a cheaper alternative than missing a credit card payment or slipping into unauthorised overdraft lending, yet are not recommended for long-term debt issues. Guess that’s why they’re called ‘payday loans’, eh?

Jokela said, in an interview with Reuters, that many people did not want to get involved in taking out big loans. He claimed that these led them into debt much more readily than the small loans which Ferratum specialised in.

Several thousand new customers took advantage of Ferratum’s short term loans in the lead up to Christmas last year so that they could buy presents for their family and friends.

Ferratum is destined for rapid growth over the next few years with a target of ten million customers on five continents by 2014, with Europe remaining its core market sector.

Ferratum only started payday loans operations in Britain in July 2011, but already has just less than one hundred thousand customers and has been experiencing double digit profit returns.

The short term loan industry as a whole has seen the benefits of the economic slump deliver them a large market share as millions of Britons have turned to the burgeoning numbers of payday loans companies for a quick fix loan of several hundred pounds at most intended to tide them over until their next pay check goes in the bank. These customers have often been refused a loan by the bigger financial institutions, like banks, because they consider their ability to pay back the loans as being too risky.

Jokela’s CEO, Jorma Jokela, said that concerns about the tendency for payday loans companies to drive low income and vulnerable people further into debt were overrated and commented further that Ferratum’s customers were all employed and were only taking out small loans. He claimed that much of the problem causing rising indebtedness was an inability to cope with much larger loans such as those associated with credit cards.

Ferratum charges a range of interest rates from 300% at the lower end to 3000% at the upper end with a maximum loan in Britain set at ₤350. The loans in the rest of Europe range up to a maximum of €600 (₤500).

Payday lenders, which provide short term loans to those in need of emergency cash have become increasingly popular in the current economic landscape.  Despite the relatively inexpensive nature of using a payday loan instead of an unauthorised overdraft – as payday lenders typically charge anywhere from £10-£30 per £100 borrowed – some consumer groups have been lobbying the government to regulate lenders more closely after taking issue with the high fees associated with missing the repayment deadline on a payday loan, and Shelter, the housing charity, recently revealed that its research indicates that one out of every seven households in the UK have resorted to either an unauthorised overdraft or a payday loan to pay their mortgage or their rent in the last 12 months.

The payday loan industry may soon be subject to new scrutiny under the Financial Conduct Authority, a new watchdog set to begin operations in 2013.  The FCA will be given the authority to fine lenders who violate new regulatory practices such as detailed explanations as to how their customers will be treated, and they will also be required to present a business plan and be subject to more stringent checks before they can begin trading.

The FCA, which will be replacing the Financial Services Authority as the watchdog with oversight of the industry, will be better equipped to investigate lenders that may be engaging in behaviour that flouts regulations.  Additionally, the FCA will also have the ability to issue bans on specific products from specific lenders that are not in the best interests of consumers.

Not only are many more people in debt further than a year ago but six out of ten people are actually concerned about the level of debt they’re in, a rise of over fifty percent from people who were similarly worried last year.

Not only did those surveyed have personal issues with the levels they owe but almost a half (nine out of twenty) are genuinely struggling to make ends meet from one payday to the next. To that end, seven percent of those are seriously contemplating a pay day loan within the next six months.

What is a payday loan, exactly?

Firstly, payday loans are unsecured cash advances that are designed to be borrowed over a short term period. They have grown in popularity purely because of the circumstances that so many of the UK population find themselves in, as outlined above.

They can be a worthwhile investment providing that they are repaid on the due date. The interest rate may look high on first glance, but when you consider the actual amount one has to repay, it can be cheaper than daily unauthorised overdraft fees or an unpaid credit card charge.

What is all the to-do surrounding payday loans?

The issue with payday loans is that they only really start to work for the payday lender when they get repeat business. Whether they lend £100 or £600, the fixed fees are the same: the credit checks, account creation, setting up fees – if you, the borrower, are taking out a repeat loan (not one that’s overdue), all of this information exists and the interest payable is, in the main, profit.

Therefore it is in the payday lender’s interest to set up a clause whereby, if the borrower misses the payment, the sum gets rolled over until the next payday; they are then paying the higher-than-average interest rate for a longer period of time, in effect giving the payday lender the repeat business to make the original loan worthwhile.

When the OFT were put under pressure to investigate the mechanics of payday lending recently, other than one or two dubious advertising methods that were quickly dealt with, they found nothing untoward in their practises as everything is clearly outlined in the terms and conditions and, as pointed out, they can be a cheaper alternative (if used correctly) than unauthorised lending from the high street.

More coming up on the R3 findings and Zombie debtors.

The survey was one of the first comprehensive analyses of how and why customers in this country are using payday loans and short term personal loans in general and is of interest in the U.S. as well, where there has been considerable debate about the effects of the industry on insolvency. In contrast with the U.S., these short term loans have only been available in Britain relatively recently.

The findings of the survey are outlined below.

• 39% of the surveyed population claimed that credit card debt was their main concern and was also the main reason that they took out online loans.

• 70% of the surveyed population said that they were unable to secure short term credit advances anywhere else but through a payday loan company.

• Two thirds of those interviewed stated that they were able to pay back their loans by the due date.

• A third of the surveyed population said that taking out an additional short term loan made it even more difficult to balance the books while the remainder said it did actually help them to get by until their next pay day or salary adjustment.

• Of the number surveyed, 7% said that they expected to take out a short term loan or paycheck loan in the next six months.

• A half of the survey said that payday loans were easier to get than any other form of loan.

The survey definitely demonstrated the demand for short term loans or instant cash loans in the country with 3.5 million, i.e. 7%, likely to take one out in the next six months or so. It also appears that the majority of such users of short term loans have made the attempt to take out more conventional loans and have been unable to do so successfully.

Approximately 3.5 million Brits may end up choosing to take out payday loans and other forms of short term lending over the next six months as they recover from overzealous spending in the run up to the festive season, estimates suggest.  However, Dawn Advice has said that if you’re already in debt, taking out another loan could only result in more serious problems down the road.

Liz Chadwick, chief executive for the debt advice service, remarked that as the chickens come home to roost in the aftermath of Christmas, January has always been a financially difficult month for Brits.  Store card and credit card bills begin arriving in the post, Ms Chadwick said, and many households find their finances stretched to the breaking point by the end of January.

This can make turning to a payday advance provider an attractive option, as these providers of short term loans are experts in helping Brits out when they’re in a financial bind.  However, while payday lenders can and do offer a valuable and much-needed service when it comes to a quick infusion of emergency cash, Ms Chadwick said that they may not be the best solution for every British household’s financial situation.

Payday loans are indeed ideal for helping to pay for an unforeseen expense that you could otherwise pay for if only you weren’t caught out between pay cheques, but if you’re already in debt, taking out one of these loans is at best a temporary measure and at worst will only make matters worse, experts say.

Assembly members have urged the Welsh government to work hand in hand with voluntary groups and local councils in order to promote alternatives to payday advance services, citing that it has become too easy to take out payday lending from smart phones and over the internet.  However, representatives from the payday lending industry disputed the fact that they were targeting poor households in Wales.

Payday lending is specifically designed to provide short-term debt relief for short periods of time, from a few days to a few weeks.  However, a motion in the Senedd recently noted that payday lenders charge interest rates that are ‘extremely high,’ with Simon Thomas, Plaid Cymru AM, claiming he found a £400 loan over the internet with a 4,214 APR interest rate.

Payday lenders took issue with Mr Thomas’ ire, claiming that an annualised rate of return that the payday lending industry advertises is a legal requirement, even though using an APR on a loan that seldom lasts more than a month inflates the percentage to eye-watering levels.  The actual cost of repayment, experts said, is misrepresented by high APRs.

The Consumer Finance Association’s John Lamidey took issue with the suggestion payday lenders were targeting the poor.  Lenders are helping people, he said, with a focus on those with variable incomes due to the weak economy, rising inflation, and rampant pay freezes.

However, Mr Thomas countered, calling payday lenders a ‘plague’ operating without due care or regulation.  He called for a cap on interest rates that he referred to as ‘excessive,’ though Mr Thomas did say that payday lenders did have a role to play in the Welsh economy.

It’s hard enough to keep the family car filled with petrol and the dining room table laden with food as it is in the current economic landscape.  Things get even harder if you’ve got a leaky roof or if that car needs to suddenly be taken down to the local garage for repair, but when it comes to dealing with an unexpected expense, taking out a payday loan can spell the difference between survival and disaster.

You could pay for the sudden expense just fine, you tell yourself, if only you could get your next pay cheque a few weeks early.  This is where payday advance firms can come to the rescue, providing you the extra cash you need for a modest fee, giving you the breathing room you so sorely need in order to keep your head above water.

All you need is a bank account and have a steady job, and the majority of providers will approve your loan in minutes, right over the internet.  For those of us struggling with poor credit as a result of mistakes in the past or suffering from pay freezes as inflation continues to climb, many providers don’t even require you to pass a credit check, and these lenders offer you the added convenience of making an automatic direct debit repayment once the loan becomes due.

However, it’s important to avoid using a payday loan in the event that you are unsure if you can repay it in full when it becomes due.  As these loans are designed to be repaid in as little as a few weeks, lenders discourage missing the deadline by charging customers who miss these deadlines rather hefty fees, so industry experts say be absolutely certain you will be able to repay the loan without encountering any more financial problems before taking one out.

Other states that have not gone the whole hog allow online lenders to finance short term loans but then limit the interest that the lender can charge. Other than those two qualifiers, federal law has left the payday lenders pretty much to their own devices but there’s a change blowin’ in the wind, predominantly to weed out cash advance lenders who are blatantly flouting the law.

When you consider that US$7bn is a little over £4.5bn, and the size of the UK payday loan culture is already £2bn, you would have to say that our US cousins are a lot better off per capita than we are here this side of the pond. We have seen, only very recently, instances where the Office of Fair Trading and Consumer Finance Association have stepped in when payday loan firms have stepped outside of advertising guidelines, but its only charities like shelter that are crying out for something to be done about the culture itself. The government have their hands tied with another escalating issue, personal injury claims, and are, so it would seem to the casual observer, content to let the population continue spiralling into accumulating cash-advance debt, as long as they’re doing it within the law and, one would assume, seeing the dividends of the high interest rates swelling back into banks to shore up the weak financial sector.

Following a hearing in Birmingham last week – Alabama, not the UK’s second city – the Consumer Financial Protection Bureau have decided to tackle the payday loan problem in the US before it gets out of hand. For some, it is already too late and they are already victims of the ‘roll-over’ system, where any unpaid amount is added to the next payday-due sum without notice (in the t’s & c’s beforehand).

It is fitting that the deep south, with its rich black heritage, was chosen as the setting. The majority of payday loan customers in the US are “disproportionately people of color” and Steve Stetson (you couldn’t make it up, could you?) of anti-poverty group Alabama Arise gave accounts of payday clients falling into the roll-over loop getting “churned through the system” as much as ten times a year.

There is a need for emergency cash in America, as there is in the UK and the payday loans industry does have support. But it is predominantly from people who’ve used it for its purpose and paid it back when due. For those who are unable to make those payments, for whatever reason, it’s a merry-go-round that’s hard to get off once you’ve bought your ticket, but missed your stop.

The figures were provided by the Scottish branch of Shelter, the organisation which campaigns for the homeless, which is worried about the growing dependence of the population on the short term loan industry and the implications for indebtedness on the chance that more and people could lose their homes.

Gordon McRae, a Shelter spokesman said that most people turned to the loan companies because they needed a quick fix, but the extremely high interest rates charged by the companies meant that it was very hard for many to pay them off by the date due.

It is thought that up to a million people across the U.K. as a whole are resorting to borrowing instant cash loans to get them through an immediate cash flow problem, while five million or more use credit cards or an overdraft to keep their heads above water.

An independent member of the Scottish parliament is now turning her focus on Westminster to try and get tougher laws against payday loan companies as she has been told that the regional Parliament is unable to legislate on debt.

Mrs Margo MacDonald says that she feels that Westminster is approaching a position where they are more likely to act on the matter. Meanwhile, Mike Dailly at the Govan Law Centre has told Mrs MacDonald not to give up with the Scottish Parliament as he thinks that it will take years for Westminster to bring in much needed legislation.

Shelter’s YouGov survey had been commissioned to find out the true extent of indebtedness and homelessness across the country. Mr McRae said the results of the survey were “extremely worrying.” He said that millions of people across the country were struggling to hold on to their homes across the country and having to rsort to quick fix loans like those provided by the payday loans companies was just making things worse.

Shelter’s Scottish branch found out that there were over forty one thousand people regarded as homeless last year, including twenty two thousand children, which was an increase of 25% since 2001.

The research survey, which was conducted by YouGov on behalf of Shelter, polled in excess of 4,000 adults in the UK, discovering that the equivalent of nearly 7 million Brits are relying on payday loans, credit cards, personal loans, or unauthorised overdrafts in order to pay their mortgage or rent.  Out of this figure of 7 million, approximately one million have taken out instant cash loans from a payday lender, though some have cautioned against taking such steps on a regular basis.

Chief executive for Shelter, Campbell Robb, expressed shock at the research findings, adding that individuals who turn to short term loans to aid in paying the cost of their housing will soon find that doing so quickly becomes unsustainable, as doing so can swiftly lead to personal debt ballooning out of control, and can even lead to repossession or eviction.  The final end result, Mr Robb cautioned, could be as dire as homelessness, and he urged that anyone currently relying on credit to aid in paying their mortgage or rent to seek the advice of a debt counselor.

In related news, Spain-based High Street bank Santander recently announced its unauthorised overdraft fees have been doubled.  This means that, for many banking customers who rely on unauthorised overdrafts regularly in order to make ends meet, doing so has just become twice as expensive.

However, industry experts point out that in many cases it can be much more affordable to take out payday loans instead of relying on an unauthorised overdraft, as it can cost less to repay the loan as it can to pay the overdraft fees charged by your bank.

The losses affect two of the organisation’s lending arms, Welcome Finance, who used to specialise in loans for those with a poor credit history before it stopped taking on board new customers in 2009 and Shopacheck, who deal in door-to-door collections for cash advance loans, likewise for people who’ve had no luck in securing loans from the high street.

Door-to-door collection, but no letter for six weeks

Given the nature of Shopacheck’s business – collecting door to door – there can be no excuse for the letters being dated in December but only arriving in 2012 for its 800,000 clients. The other 600,000 Welcome clients have likewise only recently had their notifications that anything has been awry, even though it is reported that investigations began as soon as the tapes were discovered missing.

This apology by The Cattles Group has not prevented the industry watchdogs from starting an investigation into how so many records were lost and, presumably, why the clients have taken so long to be informed.

The letter received by Shopacheck’s customers couldn’t rule out the fact that any of the information may yet turn up in the hands of an entity that would look to use it for identity theft or any other form of misuse, although it did confirm to the customers that had been affected – new sign-ups between the Octobers of 2005-2010 inclusive – that they had seen no evidence yet that the data had been abused in any way, according to their managing director Mark Bardsley, and were taking massive strides to ensure that the missing personal information didn’t show up on any radar, failing them being able to retrieve it.

Payday loans are online and secure

Many payday loan sites, unlike the insecure manner expressed here, use secured online payment facilities. Their interests rates may be slightly higher than the 399.7%APR as is quoted by the BBC for the typical repayment rate charged by Shopacheck brand, but what price on security and not having a ‘collection agent’ appear on your doorstep, especially if you are unable to meet the payment? Rather a nasty letter from the bank than someone peering in through the peephole to see if you’re in, one would have thought.

If found guilty of a breach of the Data Protection Act, The Information Commissioner’s Office can impose a fine of up to £500,000; according to their spokesperson, they will investigate the ‘alleged’ breach of the Act and then, and only then, will they decide if there is a course of action to take and what the severity of that action will be.

Payday advance lenders provide a much-needed service for those in need, especially for those Brits faced with an unexpected and crucial expense.  This is where these short term loans shine, experts say, as they enable borrowers to not have to neglect their normal monthly bills in order to cope with a sudden eventuality.

However, problems arise when borrowers take out loans from payday lenders that they cannot afford to repay.  Payday loans are designed to be taken up with a minimum of inconvenience, with the unfortunate collateral result that many people who are already deep in debt are taking out loans they cannot repay, thus sinking them even further into unmanageable debt.

The problem lies in those Brits trying to live beyond their means, debt experts say.  In the current economic landscape in the UK, you don’t need to look hard and long for a household that’s been affected, yet some individuals have decided to maintain their spending lifestyles instead of simply make do by making cutbacks.

Doing so is always a mistake, experts say, but in an era of rising inflation, jobs losses, and pay freezes, this becomes unsustainable that much more swiftly.  People need to understand the consequences of their actions, but many seem to not think much further ahead than taking out a loan of a few hundred pounds for a night out.

The inquiry by the EU focused on personal loan companies and credit card companies. However, a website that has been set up by a former victim of payday loans Steve Parry has claimed that there are a large number of companies in this country that do not declare sufficient information about borrowing criteria on their sites.

The site, known as saynotopaydayloans.co.uk, has also reported a short term loan lender to the Office of Fair Trading for not having a valid licence. The payday loan company’s licence had apparently expired in December 2010.

Parry described some of the deficiencies of some of these companies, who were offering anything from no credit check loans and same day loans to instant cash loans but without advertising their contact details on their online sites or even mentioning representative APR’s. Some of the supposedly advertised payday loan companies are not actually lenders themselves but are actually brokers who act as ago between the payday loan borrower and the lender company itself.

The EU Consumer Credit Directive requires all short term loan companies to clearly state the cost of their loans and the borrowing period. In one quick survey of what is available easily online, the Independent newspaper reported that there were literally hundreds of payday loan companies available with a only a minority conforming to EU guidelines.

The Independent attempted to contact one of the companies named by Steve Parry’s website but was unable to do so. Parry says that the area of payday loans in Britain was an “absolute minefield” which was “full of deceit and bad practice.”

European finance authorities have apparently been asked by the EU to investigate the culprits and close them down by the autumn this year. It has also promised to make public a list of all companies not obeying the rules in order to publicly shame them.

Debt collectors Fredrickson International, a subsidiary of Interlaken Group, stated that its existing customers with paying accounts will continue to be serviced.  However, it has shuttered to any new business from payday advance lending providers due to the ‘grave concerns’ it has about the current state of the market.

The new announcement will have ramifications for all of Fredrickson International business groups.  This means that competitor firms which act as debt collection agencies for payday lenders will soon be under increasing pressure from the decision, as Fredrickson’s Credit Account Management division currently oversees several debt collection agency panels.

Interlaken Group’s sales and marketing director, Jan Michael-Lacey, stated that the firm will no longer have a hand in the payday lending sector due to reservations in regards to the direction being taken by the market in general.  The sector is currently under scrutiny from the Office of Fair Trading, added the sales director, who commented that Interlaken had ‘grave concerns’ over the number of complaints the industry has generated as of late.

Mr Lacey furthermore said that Interlaken Group would adopt a wait-and-see approach in regards to taking on additional payday lending clients in the future, indicating that no decision would be made until announcements were made about the regulation of the lending sector.

The Office of Fair Trading is currently the regulator of consumer credit such as instant cash loans from payday lenders, while it is the responsibility of the Financial Services Authority to oversee other retail financial services.  However, MPs are currently examining the division with plans to separate the FSA into a prudential regulator and a new entity to be known as the Financial Conduct Authority.

Both Citizens Advice and Which? have come out recently in their endorsement of the new regulatory agency, remarking that the interventionist approach the FCA plans to adopt and a single point of contact would be a better fit for customers of retail financial services.  The FSA’s consumer panel is understood to join the two consumer groups in its recommendation.

The panel chairman, Adam Phillips, said that the FCA would have the ability to intervene in developing issues related to short term loans and other retail offerings, if the FCA is given the ability to regulate consumer financial concerns in an effective manner.  There needs to be a single regulator examining the myriad conduct issues in the financial services sector, added Mr Phillips, and Citizens Advice chief, Gillian Guy, added that it was of the utmost importance that retail lenders, debt managers, brokers, and debt collectors are all under the aegis of one regulatory body.

MPs are understood to come to a decision regarding consumer credit in the coming weeks in preparation of the financial services reform bill.  The new regulatory scheme could be ready for implementation by 2013, experts say.

The legal framework around unsecured credit regulation may also be changed by the government as well.  The Consumer Credit Act, which has an exhaustive array of lender rules and consumer protections, is the impetus for OFT, while a different law would govern the FCA’s ability to oversee banking and mortgage lending services.

Shelter’s chief executive, Campbell Robb, said that taking out one of these loans can be very appealing to anybody who is in a desperate need to cover their expenses until the next time they get paid. The payday loan companies offer anything from bad credit loans to same day loans but can be anything but a short term fix to people’s indebtedness.

If the debt is not repaid quickly together with the often exorbitant interest required, then the situation can deteriorate very quickly, leading to evictions and homelessness.

The Shelter boss said that the number of people in the position of losing their home had reached nightmare proportions with a new situation arising every two minutes. Mr Robb urged anybody in the position of having to look for instant credit fixes to pay off their mortgage or rent to look for advice as soon as possible.

The organisation revealed that nearly seven million Britons used credit to help pay off urgent bills which included rent, mortgage repayments and credit card debt. These people were turning to the payday loan companies to help find short term loans, resulting in taking on further debt to try and pay off other debt.

A spokesman from MoneySavingExpert.com, Martin Lewis said that many of the world’s payday loan companies had been chased out of other countries because of stiff regulation. They had incurred the wrath of governments overseas because of the often absurdly high APR rates that they charged, reaching up to 4000%. Britain was seen as the pot of gold at the end of the rainbow for these companies because of the lack of regulation practised here.

The fact that many, though not all of these companies promise no credit check loans further increases the chances of people who have had a history of being unable to cope with regular payments for general living being driven even further into debt.

The advice for anybody who is thinking of approaching a payday loan company for a quick loan to think again and seek advice from a not-for-profit professional body.

For many households already struggling to stretch their monthly budget in the face of swathing cuts made by the government this January has just been a bridge too far. Pounds gained on the belly but lost from the wallet serve as a reminder that the cash you were careless with is now taunting you from your waistline.

To make matters worse, there is always that one direct debit that goes out the week before the end of the month; you’re sitting there now so tempted to go withdraw that money to beat that direct debit to the last of the cash, yet you know it will mean going into your unauthorised overdraft. But you look in your purse or at the crumbs of tobacco in your tin and ask yourself: is that going to last until payday? Honestly, no.

Instead of being charged £5 or £10 a day for straying into the red, why not take out a payday loan? This has four actual advantages. Yep, true – it can be advantageous to take out a pay day loan.

1. Firstly, the obvious reason – you have a bit of cash in your pocket and you’re not going to go over your limit
2. The interest you have to pay back on a short term loan of this nature is often less – yes, less – than what you’d expect to pay for the daily charges of going into the red on your overdraft. Don’t be put off by the interest rate if it says 4,124% APR – look at the actual amount you have to pay back as a figure, then work out much you’d be charged by your bank for being overdrawn outside your authorised limit at £5 or £10 per day.
3. People often think: If I have a payday loan, I’m only going to be as short next month. The term ‘payday’ can be misleading. Many online lenders now let you pay back in monthly installments to suit your capability. It is worth noting, though, that the longer you take to repay, the more you will pay back in interest; again, run the options and see which cash advance suits you best, and be honest with yourself. Only take out the amount you need and stick to an affordable repayment scheme.
4. By paying back on time, every time, you are actually improving your credit rating, bad credit often being a reason people don’t consider payday loans. Many short term lenders who provide a payday cash advance are only concerned that you can meet the repayments you set based on your current circumstances and do not look at your poor credit history.

So, what are you waiting for? Instead of knowing how Blue Monday feels, apply for your payday loan now and have the money in your bank account within 24 hours, providing you satisfy the lender’s criteria, obviously.

The firm quickly changed its tune once the discovery was made public, according to an article appearing in the Independent.  The short term loans provider wasted no time in removing the articles in question from its website, claiming that it was not its intention to actively target students by encouraging irresponsible borrowing.

Reputable payday lenders were quick to condemn the firm’s actions, as they remarked that payday loans were excellent sources of quick funds in the event of a financial emergency, and that they should not be abused in order to finance a night out.  Doing so could lead student borrowers down a dark path of unmanageable debt, experts said.

One of the articles posted on the firm’s website advertised its loan services by claiming that they were ideal for things such as purchasing presents for others and new clothes or for going out or buying alcohol.  This prompted the Consumer Credit Counselling Service’s Una Farrell to refer to these articles as ‘reprehensible,’ and her sentiment was echoed by many other debt counselling professionals as well.

The content, firm bosses say, was never intended to encourage irresponsible borrowing in students.  The solitary goal of the article was to be used for the site’s search engine optimisation efforts in order to drive search engine rankings, the lender added.

Ms Irvine, the MSP for Irvine, was taking part in a debate in the Scottish Parliament which had been called to discuss her motion. The motion had already received support from a cross section of parties in the Parliament. She said that many payday loan companies were demanding very high interest rates – up to 4000% was quoted – with the companies taking advantage of the misfortunes of people across Scotland.

Ms Irvine explained to the Parliament the mechanism of the payday loan principle, whereby those who had agreed to the conditions of cash loans or supposed short term loans by allowing access to their bank accounts. The terms and conditions of the loans required authorisation to be able to make withdrawals form the borrower’s account.

The amount borrowed normally had to be paid back in full, which means the amount borrowed plus the interest on the next pay day. Ms Irvine thought that the loan soon turned into a simple way to access somebody’s bank account and take out money.

The MSP used to work as a manager of a citizen’s advice bureau, so presumably had had plenty of first hand experience of people who had got into difficulties with instant cash loans and short term loans given out by these companies.

She went on to explain that many people who took out this type of loan never managed to get out of debt because their original debt simply got rolled over to the next pay day. In fact, rather than borrowing their way out of trouble, they were digging themselves further and further into a debt hole.

She thought that the whole payday loan industry should be monitored and regulated more effectively by the UK government and other options to borrowers who were experiencing short term financial problems should be explained more obviously.

Her advice to those people who were contemplating taking out a payday loan was to avoid doing so and think of the other options which were available.

Charity organisations and consumer analysts have also expressed their fears about the pull, the attraction, that having the ‘no credit check loans’ sign has over people who have poor credit history. It is ironic that they are the market being most lured to this ‘easy way out’ when they are the precise people who should be steering well clear of going further into debt than they already are.

However, when the Office of Fair Trading were asked to investigate the practise of payday loan services in 2010, the results contradicted current fears, stating that they were a ‘legitimate and useful’ institution that served a purpose for those who needed money but were being refused by traditional lenders due to their careful lending policies, rejecting anyone seen as a risk without question. It is perhaps from these practises that payday lending has blossomed in recent months and is often a first port of call for those who still believe that banks and building societies will not even consider their applications.

In a recent report, the BBC outlined the payday loan process from start to finish, based on the findings of the OFT investigation. In this two-part article, we look at their interpretation of the report and how that affects the consumer in an economic climate that has improved little since the results of the OFT report were published.

What’s a payday loan and how do they work?

High Street cash-advances can vary slightly to those provided by online payday loan providers. In the case of a high street loan, it is usual to provide a cheque dated on or around the day that you expect to have the funds available; the repayment amount will be agreed depending upon how far in advance that date is and the amount you want to borrow. You may have to provide the last three months’ most recent pay-slips and proof of your identity and address.

An online payday loan is just as simple a process. You approach a lender by filling out a form providing your bank details and the amount you want to lend. You will know how much you have to repay in advance by their advertised rates or, the current fashion is the use of a ‘slider’, which you move until you’re happy with the repayment and the date. The lender will then confirm your eligibility through whatever their chosen validation method is and that you have a regular income that can meet the repayment on the date you set out on the online form, based on that information. The money you have asked to lend is usually in your account within 24 hours.

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In 2010, the OFT ran a study into payday loans and found them to be legitimate and useful; the following year, the BBC compared that report to the conditions that were rife in the economy then, which still exist today. We continue our breakdown of their interpretation of  The Office of Fair Trading’s report, here:

What makes up a payday loan customer?

You would think that with all levels of society looking for a little extra cash from somewhere, there would be no definition of your typical payday loan customer. The OFT report suggests differently.

The typical individual looking for a short term loan of this nature is, more often than not, a childless, single young male living in rented accommodation on a salary in excess of £1,000 per month. As payday loans can prove less costly than going into an unauthorised overdraft, lenders prefer a cash advance from alternative sources rather than incur daily charges of between £5-£10 day for the period that they have exceeded their agreed limit.

What is the size of the market?

The volume of the market has exploded since the OFT report in 2010. When the report was concluded, the volume was approximated at £900M, with 1.2M customers making up that figure.

A recent statement by the Citizens Advice Bureau suggests that the figure has quadrupled in the last two years. That would concur with a more recent estimate by the BBC that the market for payday loans in the UK now stands at £2b, more than a 100% rise in less than two years.

How many payday lenders are there and who regulates them?

According to the 2010 OFT report, there were 2,000 high street lenders, however, a fair proportion of those were branches of The Money Shop. The report also stated that there were 100 online lenders. There are, on face value, a lot more than that, now, due to the massive demand. However, there are only actually around twenty actual online payday loan companies – all of the other 1,000′s are affiliates or brokers of the parent companies. And, yes, all of them will have had to apply to the OFT for the consumer credit license, which the OFT regulate and monitor

With regulations in place, why the consternation?

There is no problem with the organisations themselves and neither do the OFT have any plans to cap the amount of interest chargeable (anything between 2-4,000% for online payday lenders, give or take).

The problem lies firmly with the customer and how they can quickly let the payday loans get out of hand. Again, there is very little the OFT can do about the misuse of the money when it arrives in any individual’s hands.

As long as the lender is transparent with their charges, not misleading with their advertising and sticks within the guidelines of their terms and conditions (which will adhere to the credit license), they are doing nothing wrong and, as per the summary of the OFT investigation, providing a useful service to UK citizens who, for whatever reason, are struggling to make ends meet.