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

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

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consulant

    £20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250...

    Guru Careers: Financial Controller

    £45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Recruitment Genius: Sales Adviser - OTE £24,500

    £22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

    Day In a Page

    Mullah Omar, creator of the Taliban, is dead... for the fourth time

    Mullah Omar, creator of the Taliban, is dead... again

    I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
    Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

    Margaret Attwood on climate change

    The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
    New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

    New Dr Seuss manuscript discovered

    What Pet Should I Get? goes on sale this week
    Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

    The cartoon hedgehog leading the way into a whole new reality

    Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
    Ants have unique ability to switch between individual and collective action, says study

    Secrets of ants' teamwork revealed

    The insects have an almost unique ability to switch between individual and collective action
    Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

    Donovan marks his 50th year in folk

    The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
    Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

    Simulator recreates thrill of F1 circuit

    Rory Buckeridge gets behind the wheel and explains how it works
    Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

    Twitter accused of 'Facebookisation'

    Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
    Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

    Jane Birkin asks Hermès to rename bag

    The star was shocked by a Peta investigation into the exotic skins trade
    10 best waterproof mascaras

    Whatever the weather: 10 best waterproof mascaras

    We found lash-enhancing beauties that won’t budge no matter what you throw at them
    Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

    Diego Costa: I go to war. You come with me...

    Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
    Ashes 2015: England show the mettle to strike back hard in third Test

    England show the mettle to strike back hard in third Test

    The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
    Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

    Charley Hull: 'I know I'm a good golfer but I'm also just a person'

    British teen keeps her feet on ground ahead of Women's Open
    Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

    Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

    Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
    Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

    Our choice is years of Tory rule under Corbyn or a return to a Labour government

    Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'