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.