The number of people struggling with payday loan debts is still soaring. New figures published today have revealed a climb of almost 50 per cent in those forced to seek help after falling into debt problems because of payday loans in the first six months of the year.
Debt charity StepChange reported that between January and June 2014 it handled more than £72 million worth of payday loan debt that people were having difficulty repaying, up from £51m in the first six months of 2013.The number of people it helped in the period rose to 43,716, up from 30,762 the previous year.
StepChange chief executive Mike O’Connor said: “The figures show that the payday market all too often fails to treat customers fairly, especially those in financial difficulty.”
The charity believes there is a case for a tougher total cost cap than 100 per cent of the value of the loan, which has been proposed by the City Watchdog, the Financial Conduct Authority.
“While the FCA’s proposed price cap is a crucial step forward, there is still much work to be done to ensure that payday loans can no longer plunge people into a cycle of unsustainable borrowing and entrenched financial hardship,” said Mr O’Connor.
The Competition and Markets Authority found the average initial payday loan taken out is £260. Meanwhile the average StepChange client with payday loan debt has an income (net) of £1,305. That means that someone with just one payday loan debt which reaches the 100 per cent cap would end up owing a substantial part of their income.
That, in turn, could lead to them taking out further borrowing and getting into deeper financial difficulty, the charity warned. It has called for a separate cap on default costs to encourage lenders to lend responsibly.