Weekly payday roundup: 7 days ended 7 Nov 2012:
New research released this week has revealed that some 4 million Brits may end up deep in debt due to the costs of borrowing cash for Christmas spending.
Insolvency trade body R3 says that there are 8 per cent of the general populace that may end up turning to payday loan providers in order to have enough money to spend over the festive season, based on their recent 960 person survey. In light of the research findings, R3 council member Louise Brittain has come forward to urge anyone considering the use of a high interest rate short term loan in order to buy gifts – or worse yet, food – would be wise to think again.
There is a time and a place for payday advance lending, said Ms Brittain, but only when used properly to bridge the gap of a genuine financial emergency. However, the council member warned that many payday borrowers have serious problems when it comes to pay the lending back in a timely manner, leading to having to roll it over or having to take out another – and with lenders such as Wonga charging more than 4,000 per cent annualised interest, late fees and rolled-over interest can turn out to be positively crippling.
This isn’t the first time R3 has conducted research on the problems payday lending may bring. In December of last year, the trade body conducted a poll of more than 2,000 Brits, discovering that one out of every three had no choice but to take out a second payday loan in order to repay an initial one.Research conducted by R3 in December 2011 among 2,005 adults showed that one in three of those who took a payday loan could not pay it off and had to take out another one, while nearly half said that taking out the loan had actually had a deleterious effect upon their financial situation.
However, there is some good news for beleaguered borrowers, thanks to the newest amendment to the Financial Services Bill. The amendment could see the Financial Conduct Authority, the new regulatory body that the Bill would create, the authority to place interest rate caps on payday lending.
The Consumer Finance Association’s chief executive, Russel Hamblin-Rowe, disputed the fact that payday lenders lend in an irresponsible manner. The CFA represents many short term loan providers in the UK, and Association-sponsored research says that 85 per cent of payday loan customers do not run into repayment problems.