Money Insider: Less talk on payday loans, please. We need action

 

Payday lending returned on Monday to a place with which it has become very familiar: under the microscope – this time at a London summit.

The meeting was attended by debt charities, consumer groups and officials from the financial regulator, and some of the lenders themselves.

Despite a growing wave of criticism over the last few years from the media, MPs and consumer champions, the misery inflicted by payday loan providers has continued to escalate.

Recent figures released by National Debtline highlight the seriousness of the problem. They reveal that the charity handled 3,300 calls for help in 2010, 10,300 in 2011 and more than 20,000 in 2012.

And it is a trend that continues to become more pronounced, with almost 7,000 calls handled in the first three months of 2013. It was important, therefore, that Monday's summit was not just another lot of hot air.

One of the proposals put on the table was to ban television advertisements for payday loans during the daytime, with the regulator stating that it could even take this a step further and ban high-cost loan advertising on TV altogether.

While this would be a big step, many lenders have harnessed the power of the internet as their main sales channel, so while a television ban would be a start, what about online and newspaper advertising and the emblazoning of lenders' names across the shirts of football teams?

With speed of credit being one of the major selling points for these loan companies, it was encouraging to hear that this was also an area under scrutiny, with the possible introduction of a time delay.

At the moment, the fact that you can have the money in your bank account within 15 minutes of applying means that, in some cases, inadequate affordability checks are being carried out before the loan is agreed – something else that needs much closer attention. Not carrying out a thorough evaluation of the ability of the borrower to pay the debt back can actually play into the hands of payday companies because if the customer can't make the payment after 30 days, then the loan will be rolled over for a further period and will involve additional fees and interest.

So while it may only take 15 minutes to get yourself a payday loan, you could find it taking you months or years to repay what is advertised as short-term finance.

A further issue on the table at the summit was the ability of fborrowers to amass debts by taking out loans with numerous payday providers. The suggestion is that a central register could be established as a means of managing this problem. Let's just hope it will not take years to pull together.

I appreciate that there need to be alternative borrowing options for customers with a poor credit history, so it is essential that the Government does more to promote alternatives, including the vast network of credit unions across the country.

As well as credit unions, there are plenty of other sources of finance out there for customers who need to borrow money but are excluded by the mainstream lenders.

Borrowers with imperfect credit histories have access to specialist credit cards from the likes of Vanquis, Luma and Aqua. These charge far less than the horrendous four-figure APRs levied by payday loan providers. Similarly, there are options to borrow money in your own name if you have a creditworthy friend or relative willing to stand as guarantor for your loan. One of the better-known providers of this type of service is Amigo Loans, where you can borrow from £500 to £5,000 at an APR of 49.9 per cent.

For all the promising ideas and encouraging words that will have been voiced this week, National Debtline is dealing with 100 new payday loan related debt issues every day. It's now time for less talk and more action.

Andrew Hagger is an independent personal finance analyst from moneycomms.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

PROMOTED VIDEO
Sport
football
News
Tangerine Dream Edgar Froese
people
News
Rob Lowe
peopleRob Lowe hits out at Obama's snub of Benjamin Netanyahu
News
Davies (let) says: 'Everybody thought we were having an affair. It was never true!'
people'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
Arts and Entertainment
Over their 20 years, the band has built a community of dedicated followers the world over
music
News
Staff assemble outside the old City Road offices in London
mediaThe stories, the writers and the changes over the last quarter of a century at Britain's youngest paper
Life and Style
The Oliver twins, Philip and Andrew, at work creating the 'Dizzy' arcade-adventure games in 1988
techDocumentary looks back at origins of the computer-games industry
Arts and Entertainment
Krall says: 'My hero player-singer is Elton John I used to listen to him as a child, every single record
music
Arts and Entertainment
The Wu-Tang Clan will sell only one copy of their album Once Upon A Time In Shaolin
musicWu-Tang Clan and The Sexual Objects offer fans a chance to own only copies of their latest albums
News
i100
Environment
Number so freshwater mussels in Cumbria have plummeted from up to three million in the 20th century to 500,000
environment
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

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Recruitment Genius: Outbound Sales Executive - OTE £25,000

    £16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Java Developer / J2EE Developer - Watford - £45,000 - £47,000

    £45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...

    Ashdown Group: Marketing Product Manager - (Financial Services) - SW London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Day In a Page

    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project
    Diana Krall: The jazz singer on being friends with Elton John, outer space and skiing in Dubai

    Diana Krall interview

    The jazz singer on being friends with Elton John, outer space and skiing in Dubai
    Pinstriped for action: A glimpse of what the very rich man will be wearing this winter

    Pinstriped for action

    A glimpse of what the very rich man will be wearing this winter
    Russell T Davies & Ben Cook: 'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'

    Russell T Davies & Ben Cook: How we met

    'Our friendship flourished online. You can share some very revelatory moments at four in the morning…'
    Bill Granger recipes: Our chef serves up his favourite Japanese dishes

    Bill Granger's Japanese recipes

    Stock up on mirin, soy and miso and you have the makings of everyday Japanese cuisine
    Michael Calvin: How we need more Eric Cantonas to knock some sense into us

    Michael Calvin's Last Word

    How we need more Eric Cantonas to knock some sense into us