Simon Read: Payday lenders allowing multiple loans is leading to debt disaster
The number of people getting into financial trouble by taking out multiple payday loans has soared in the past three years, new figures published by a debt charity revealed this week.
Since 2009 four times as many people have turned to the Consumer Credit Counselling Service for help because they have 10 or more payday loans. Yes, that did say 10 or more.
Meanwhile the charity says it's experienced a three-fold increase in distraught debtors asking for help with the five or more payday loans they've taken out.
The fact that a person has one payday loan would send off alarm bells in me. As I've often written, there is a place for the deals. But I believe they are only suitable for those who know exactly how much the loans will cost them and also know that they can — and will — be able to afford to pay them back quickly.
Short-term credit becomes a danger when it's used by people who don't understand the costs and, especially, those who don't know how they are going to pay them back.
So if someone takes out more than one loan at a time, there's no doubt in my mind that they're heading for financial woe.
There are further statistics from the charity that make for interesting reading. It reports that more people than ever are getting into trouble after taking out high-cost credit — which costs up to 4,000 per cent APR from the likes of Wonga and other payday lenders. And the average amount struggling people owe is also climbing — it's up from £1,187 in 2009 to £1,458 this year.
The charity said the number of people seeking help with payday loan debts soared from 6,491 in 2009 to 17,414 in 2011. And with almost three months to go in 2012, 16,467 desperate debtors have this year sought help.
The payday loan industry has been thrust back in the spotlight this month partly because leading firm Wonga has splashed out millions on sponsoring Newcastle United.
The move has prompted plenty of debate about the expensive lenders and their place. Most Newcastle fans are simply happy that their club has been promised an inflow of much-needed cash.
Most debt experts worry that Wonga will use its new influence in the North-East to encourage more people to take out one of its expensive loans.
And that's one of the fundamental things that's wrong about the whole payday loan industry. The firms that offer them appear to use whatever methods they can to flog them.
In recent months we've seen ads targeting students and the un- employed with the message — and I'm paraphrasing only slightly — "take a loan and have a party!".
We've also seen ads on apps aimed at children as well as misleading claims about the cost of credit.
This type of advertising needs to be much more tightly controlled, I believe, to stop millions ending up in debt misery.
The problem at the moment is that the loans are sold to absolutely anyone. I did meet with representatives of some of the leading payday loan firms this week, who claimed that responsible payday lenders turn down nine out of 10 applicants.
But the problem is that there are countless irresponsible lenders out there. I was approached by one this week on Twitter (@simonnread) who asked for publicity.
I'm not going to name the lender (because they would see that as good publicity) but I will set out some of their deplorable practices.
For starters their website contained no mention of the cost of loans. This is a legal requirement which means, straight away, that the new lender is flouting the law.
Next, the website was full of good reasons to take out a loan, but no warnings about having to repay the debt. Third, and perhaps most irresponsibly, it stated that it doesn't matter if you've been turned down by other lenders, the website would still find you a loan.
Like the hundreds of other rogue payday lenders springing up, it flouts the law and flogs expensive loans to people who can't afford them, putting them in serious danger of ending in a disastrous debt cycle.
The fact that most payday lenders have no credit scoring and don't share data about their loans means it's easy for someone to borrow several times over.
I hope that the current Office of Fair Trading probe into the sector examines these issues. Rogue payday lenders must be closed down quickly while those that aim for respectability most be more tightly controlled.
- 1 Planes go hybrid-electric in important step to greener flight
- 4 Hip hop is both racial and political, and for Iggy Azalea to suggest otherwise is insulting
- 5 Man hospitalised with pneumonia after downing eggnog at office Christmas party
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
Alex Salmond has 'broken his word to the Scottish people' says Scottish Lib Dem leader
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
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