Stop rogue lenders preying on the poor this Christmas

Some five million people could turn to high-cost credit in coming months. We must help them avoid debt disaster, says Simon Read.

The army of unscrupulous lenders waiting to lure unsuspecting people into a debt hell is growing daily. The dodgy firms are attracted by easy profits and use whatever tricks they can to encourage people to take on loans they can't afford to repay so that they get sucked into a cycle of debt that many find impossible to escape.

And with the expensive Christmas season upon us, more people than ever will be tempted by the ease of borrowing £100 or more, especially through the many online lenders that have sprung up in recent months.

As The Independent has reported this week, more than 5 million people are expected to turn to expensive short-term credit such as payday lenders in the next few months.

Our investigation into lenders looking to cash in on Christmas published on Tuesday revealed that many aggressive firms are actively encouraging as many people as they can to take out expensive payday loans.

Typically the websites invite people to "join in the holiday festivities without a second thought to the cash in your bank account". But as anyone who falls prey to the irresponsible marketing soon discovers, there's a massive sting in the tale of these offering of easy cash: that's the outrageous charges on the short-term loans which can soar to 4,248.9 per cent APR. And with many lenders seemingly encouraging people to take out multiple loans, the misery quickly deepens.

Take the example of Sally (not her real name). She works as an administrator in a local school and has a 15-year-old son. But a financial disaster hit when her husband walked out, leaving her with considerable debts and bills to pay.

She turned to a payday lender to get £200 to see here through a short-term crisis, but that led to long-term problems. "I quickly found myself in a difficult debt situation," Sally admits. "I was using payday loans to pay for the things we needed, but the interest would make it more difficult each month. It got to the point where I was using different payday loan websites just to pay off the debt."

The online payday loan sites are unregulated, which means many don't bother to check whether borrowers can afford to repay their loans. Sally was able to use four different websites – Cash Genie, 24hour Money Box, Quick Cash and Money Lender – to juggle her payments.

"In the end I had four on the go but with the high charges in a year the £200 I originally borrowed became £5,000."

There are plenty of similar stories. Teenage mum Sarah (not her real name) is a recent care leaver who relies on benefits. But a difficult family situation recently meant that she had to leave her home town to move to another city.

"Money was tight but social services were clear that I had to leave – I didn't have a choice," Sarah says. "It was a really difficult time but in the middle of all the madness I started thinking, how am I going to get the money together for a removal van for my furniture?"

She looked online and discovered what she thought was a great deal with Quickquid. "It seemed too good to be true – I could have the £100 I needed for the removal van within minutes."

Agreeing the loan led Sarah to her own financial woes. "My details seemed to have been passed on to other loan companies because I suddenly started getting bombarded with emails asking me if I needed to take out another loan. The next thing I knew, £700 had disappeared out of my Lloyds TSB account."

Luckily for both these women, help was at hand. Sarah turned to the children's charity Barnardo's which helped her with essentials such as nappies and milk for her child. The charity is also helping Sarah to get to grips with saving money and independent living.

Sally, meanwhile, with the help of a friend for the £525 cost, filed for bankruptcy and had all the payday debts wiped away. But she still had to find the money to pay her landlord oil fuel bills or she would be evicted. She was helped by the poverty charity Elizabeth Finn Care, which stepped in to clear the bill.

Both charities have tales of many other people struggling after falling into the clutches of aggressive lenders, so have joined with The Independent in calling for more advice and guidance for those considering borrowing from high-cost lenders.

Ideally the Office of Fair Trading – which regulates credit in the UK – would step in and shut down the irresponsible lenders, but as the law stands it does not have the powers.

It is currently investigating some of the dodgier practices used by the payday lending and high-cost credit industry. In particular it is examining accusations of irresponsible lending and pushy marketing, and is expected to announce tougher new rules next spring. But that won't help those trapped by unscrupulous lenders at Christmas.

Barnardo's assistant director of policy Neera Sharma warns: "The most vulnerable families in society are being lured into an unaffordable debt trap.

"The banks must ensure that high-quality financial advice is accessible to those living on the tightest budgets. Additionally, Barnardo's is calling on the Office of Fair Trading to help protect vulnerable families, by compelling unscrupulous lenders to make clear their extortionate rates."

Malcolm Tyndall, director at Elizabeth Finn Care, says: "We are delighted that The Independent is highlighting the issue of the true costs of payday loans – especially just ahead of Christmas.

"Often they can be seen as a quick fix, but for many it can only make their financial situation worse – and they head further into the poverty cycle."

Recent research undertaken by the charity shows that almost half of people who have taken out a payday loan in the past year have never checked their welfare benefits or tax credit eligibility. Through the charity's Turn2us service people can find out if there are grants or benefits they can claim.

Providing more information on alternatives to the high-cost credit pushers – such as ethical co-operatives and credit unions – is the only way to stop them taking advantage of vulnerable people this Christmas.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Talent Acquisition Consultant

    £22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

    Recruitment Genius: Experienced Financial Advisers and Paraplanners

    Negotiable: Recruitment Genius: This extremely successful and well-established...

    Guru Careers: FX Trader / Risk Manager

    Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

    Guru Careers: Investment Writer / Stock Picker

    Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

    Day In a Page

    How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

    How to stop an asteroid hitting Earth

    Would people cooperate to face a global peril?
    Just one day to find €1.6bn: Greece edges nearer euro exit

    One day to find €1.6bn

    Greece is edging inexorably towards an exit from the euro
    New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

    'Iron Man' augmented reality technology could become reality

    Holographic projections would provide extra information on objects in a person's visual field in real time
    Sugary drinks 'are killing 184,000 adults around the world every year'

    Sugary drinks are killing 184,000 adults around the world every year

    The drinks that should be eliminated from people's diets
    Pride of Place: Historians map out untold LGBT histories of locations throughout UK

    Historians map out untold LGBT histories

    Public are being asked to help improve the map
    Lionel, Patti, Burt and The Who rock Glasto

    Lionel, Patti, Burt and The Who rock Glasto

    This was the year of 24-carat Golden Oldies
    Paris Fashion Week

    Paris Fashion Week

    Thom Browne's scarecrows offer a rare beacon in commercial offerings
    A year of the caliphate:

    Isis, a year of the caliphate

    Who can defeat the so-called 'Islamic State' – and how?
    Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

    Marks and Spencer

    Can a new team of designers put the spark back into the high-street brand?
    'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

    'We haven't invaded France'

    Italy's Prime Minister 'reclaims' Europe's highest peak
    Isis in Kobani: Why we ignore the worst of the massacres

    Why do we ignore the worst of the massacres?

    The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
    7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

    Remembering 7/7 ten years on

    Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
    Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

    They’re here to help

    We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
    Time to lay these myths about the Deep South to rest

    Time to lay these myths about the Deep South to rest

    'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
    What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

    What exactly does 'one' mean?

    Court of Appeal passes judgement on thorny mathematical issue