The instant cash loans industry is bracing for an investigation by the UK consumer watchdog agency after protests against high interest rate short term loans have emerged, experts say.
Detractors of short term loans have stated that the fear of families already finding it hard to make ends meet could be victimised by payday lenders over the Christmas season as they make use of lenders’ services to purchase gifts and food. One such concerned organisation, the Child Poverty Action Group, has urged the government to undertake a policy review to put an end to UK households generating spiraling levels of debt, while R3, an insolvency trade body, has reported that 3.5 million Brits may be considering going in search of cash loans over the first half of the New Year.
With pay freezes, job losses, or pay rises not in line with the rising cost of living, the finances of British workers have been under siege by rising inflation and household bills. Three out of every five survey respondents indicated worry in regards to their current debt levels – an increase of 21 per cent from a year ago – and R3 says that this level of concern was a record high for the time the organisation has been producing reports.
However, the true cause of concern is that low income earners, left out in the cold by high street lenders, will have no choice but to resort to payday lenders, critics say. These detractors point to what has been referred to as ‘exorbitant’ APR interest rates of sometimes as high as 5,000 per cent – yet many industry experts state that the use of an unauthorised overdraft from a High Street bank can cost just as much if not more, and that using an annualised interest rate calculation method on a short term loan – something that all lenders in the UK are bound to by law – is inherently misleading in relation to the actual cash cost of the loan.