While payday advance lenders have been growing more popular and successful due to the current economic landscape, the amount of criticism they have drawn has also increased to keep pace with their new popularity, instant cash loans experts recently reported.
Approximately two million Brits reported taking out a instant cash 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 an instant cash 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.