More Britons 'turn to payday loans'

 

Payday loan companies are expected to see a surge in demand over Christmas and next year as Britons struggle with their finances, a report said today.

Insolvency trade body R3 found that 7% of people it surveyed, potentially equating to 3.5 million British adults, would be tempted to take out a short-term loan over the next six months, which can result in interest rates of several hundred per cent being charged.

Consumers have been faced with high living costs and soaring bills, against a background of job losses, pay freezes and small pay rises.

The Office of Fair Trading is to carry out a review next year to ensure businesses are complying with responsible lending rules amid criticism of the payday loan sector.

The R3 Personal Debt Snapshot found that 60% of people were worried about their current level of debt, up by 21 percentage points on the same time last year and the highest level of concern recorded in the six reports R3 has produced on the subject.

Nearly half (45%) of people struggle to make it to pay day, the study found, up seven percentage points on the same time last year.

This figure rose to 54% of people in the North East and North West, where people appeared to be struggling the most.

The survey also highlighted concerns about 16% of those surveyed who were dubbed "zombie debtors".

They were people who were only able to pay the interest on their debt, but not reduce the amount they owed.

R3 president Frances Coulson said: "Remaining on this treadmill carries no provision for outside factors making things worse - this group should really consider taking proper budgeting advice or the correct form of debt relief."

A fifth of the 2,005 British adults surveyed thought their financial situation would improve over the next six months but a third thought it would get worse.

Financial website moneysupermarket.com said inquiries about payday loans have been "continually growing" in the last few months, with a 23% increase in November on the previous month.

Consumer Focus called for more to be done to regulate the industry and to stop people spiralling into debt, including limiting such loans to five per household each year.

But the Consumer Finance Association (CFA), which represents businesses offering short-term loans, hit back at its critics generally, saying they are failing to protect consumers from the "marketing tactics and extortionate repayment costs of loan sharks and banks".

The CFA said it is concerned that a "lack of understanding" is lumping all lenders together and said the industry was already "highly regulated".

John Lamidey, chief executive of the CFA, said: "If those that seek to protect consumers from extortionate credit truly have the best interests of consumers at heart, then seeking to claim that highly regulated, responsible short-term lenders are the same as loan sharks cannot possibly achieve this aim."

The CFA pointed to high bank charges for customers going into an unauthorised overdraft, compared with a short-term loan from one of its members, typically costing between £10 and £30 per £100 borrowed.

The Prime Minister's official spokesman said: "We know that there are concerns about these companies and the way they operate.

"We obviously want to ensure that vulnerable people are properly protected and we are working with the industry and consumer organisations to ensure that people have the protections that they need.

"It is an issue we are already looking at. We are trying to put in place a comprehensive code of practice for that market.

"The Department for Work and Pensions is looking at how it can better support alternatives, such as credit unions."

The spokesman added: "It is not a straight-forward area. You have to be careful when intervening in this kind of market that it doesn't have the effect of reducing access to credit for some people and you need to be careful that you don't drive people towards loan sharks by introducing regulation. It is important to get the balance right."

Official figures released last month showed that bankruptcies have hit their lowest levels since 2004 as fewer people were declared insolvent in the third quarter of this year.

But analysts warned that the figures did not give the full picture of those with severe debts. The number of debt relief orders and individual voluntary arrangements (IVAs) went up year-on-year.

PA

Start your day with The Independent, sign up for daily news emails
New Articles
tvDownton Abbey Christmas special
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
News
news
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Arts and Entertainment
tv
Life and Style
fashion
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.

iJobs Job Widget
iJobs General

Recruitment Genius: Account Manager

£20000 - £35000 per annum: Recruitment Genius: This full service social media ...

Recruitment Genius: Data Analyst - Online Marketing

£24000 - £35000 per annum: Recruitment Genius: We are 'Changemakers in retail'...

Austen Lloyd: Senior Residential Conveyancer

Very Competitive: Austen Lloyd: Senior Conveyancer - South West We are see...

Austen Lloyd: Residential / Commercial Property Solicitor

Excellent Salary: Austen Lloyd: DORSET MARKET TOWN - SENIOR PROPERTY SOLICITOR...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all