1.5 million took out loans to fund Christmas
Consumers will remain vulnerable to fast-finance firms until a crackdown on credit charges in 2014
Payday lenders and high-street fast-finance firms are expected to campaign hard for more customers over the next 12 months before a crackdown on unscrupulous lending, an MP said last night. The warning came as new figures revealed that around 1.5 million people took short-term loans – some at more than 1,000 per cent interest – to get through a recession-blighted Christmas.
In a survey by Which?, 92 per cent of respondents agreed that people feel under pressure to spend too much at Christmas, and almost a quarter (22 per cent) said they could afford to pay for Christmas only by using credit cards and overdrafts. So it is not surprising that payday-loan firms, pawnbrokers and other money shops were able to cash in.
Parliament has approved laws enabling the new Financial Conduct Authority to protect consumers from exorbitant interest rates, but the FCA will not take over regulation of the market until 2014. In the meantime, consumers – including increasing numbers of middle earners – will be left vulnerable, says Stella Creasy, Labour MP for Walthamstow.
The Office of Fair Trading (OFT) might help fill the void when it publishes compliance guidelines for payday-lending firms next month, she added, but coming benefit cuts and stagnant wages are expected to compound people's problems.
"If the OFT sets out what it considers irresponsible it will help the FCA to come in and enforce that much better," said Ms Creasy, who has led the campaign to end legal loan-sharking. "But it is crisis time. I have been saying to people in my constituency: 'If we can get through 2013 we will be all right.' "
Campaigners are pressing the Government to set a limit on the amount to be paid back on loans, to stop people being trapped in a cycle of debt. Surprisingly, perhaps, research has shown that 80 per cent of payday loans were for basics such as food and utilities, and 30 per cent of those who took them out earned between £30,000 and £50,000.
"Lots of people who get payday loans have bank accounts. This isn't an affluence crisis, people just getting money to buy children a Nintendo," Ms Creasy said. "This is a needs crisis. People need the money to eat. They are borrowing because people are trying to keep their houses."
The research by Which? revealed that 46 per cent of people used credit cards, overdrafts, store cards or loans to cover their festive spending, while 36 per cent dipped into savings, taking out £380, on average, to cover bills.
The Consumer Finance Association, which represents many of the big high-street lenders, admitted last night there was a problem but said a new code of conduct introduced last month, including increased transparency of fees and better rules on affordability, would help. A spokesman said: "Our members have gone to a lot of effort and expense to introduce the code of practice, which we hope will make a difference."
A spokesman for StepChange, which offers free debt advice, said the use of loans over Christmas "reflected what we are seeing among the thousands of people who seek our help with debt each week".
He said: "Household budgets have been squeezed by a range of pressures, such as wage freezes and inflation, to the extent that many are now at breaking point."
- 1 Husband creates spreadsheet detailing wife's 'excuses' for turning down sex
- 2 Saneie Masilela, 9, marries Helen Shabangu, 53 years his senior, for the second time
- 3 UK pirates will get four warning letters a year
- 4 Why I'm on the brink of burning my Israeli passport
- 5 Is Gideon Levy the most hated man in Israel or just the most heroic?
Malaysia Airlines flight MH17 crash: 'Nine Britons, 23 Americans and 80 children' feared dead after Boeing passenger jet is 'shot down' near Ukraine-Russia border
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The truth about conspiracy theories is that some require considering
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
- < Previous
- Next >
iJobs Money & Business
£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...
£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
£70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...
Day In a Page
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar