Bradford’s local newspaper, The Telegraph and Argus, has reported a huge increase in the number of residents of the northern city who have got into serious debt over the past two years, with the finger predictably pointing to the short term loans companies, that have sprung up locally as they have elsewhere in the country.
The debt ridden scene has been uncovered just as the Government’s belated review of short term loans practices has been grinding into action, courtesy of the Office for Fair Trading (OFT).
Only a year ago, it is estimated that only ten percent of those in debt had taken out short term loans, while now the figures have soared to fifty percent. The seriousness of the issue is a result of the difference in the interest repayments that people taking out instant cash loans have been forced to pay, compared to those of more traditional lenders, such as banks and credit card companies.
Many short term loans companies are lending out their short term loans for three to four thousand percent per annum. The actual amounts of interest do not seem that great when the loan is taken out for a week or so, but the problem is that many of the people who take out the loans cannot repay after a week and have to take out another loan, sometimes with a different lender, just to pay the first one back.
The manager of the Bradford Citizens Advice Bureau, Alex Bohdanowicz, has said that the advice bureau has seen a much larger number of their clients dropping in for advice about their ever increasing debt burden. She said that many of the borrowers are reporting that the loan repayments are being taken directly from their bank accounts on a regular basis.
On a national scale, it has been reported that all types of debt, not just to short term loans lenders, have increased dramatically by some 68% in the last two years alone.
The figures available from the Citizens Advice Bureau all over Britain show that the numbers of people in debt rose from 1,354,204 two years ago, to 2,274,067 by the end of last year.
Ms Bohdanowicz said that borrowers are not borrowing money from payday lenders just to go on holiday. They are real needs like paying the rent or even going to the supermarket to buy food. She welcomed the latest review by the OFT saying that it was about time that there was an investyigation into irresponsible lending.
The OFT has now already written to the industry representatives with complaints about advertising standards.