Payday loans crackdown 'will hit the poor' and leave families without credit, claims think tank

A slow job market and cuts in emergency hardship payments had made poor families more likely to depend on short-term loans (Getty Images)

A government crackdown on legal “loan sharks” will leave poor families without any access to credit, despite being unable to manage on their shrinking incomes.

A study of the poorest families living in social housing in the Midlands, carried out by the Human City Institute think tank, found that the majority were in some form of debt. More than half (55 per cent) owed more than £1,000.

The study, entitled Beyond the Margins and due to be published on Monday, found that benefit cuts, a slow job market and cuts in emergency hardship payments had made poor families more likely to depend on short-term loans. Many were unable to access high-street banks and relied on payday loans, money shops or loan sharks. But now these are being rolled back, leaving them with nowhere to go.

Kevin Gulliver, co-author of the report, said: “There needs to be something to fill that gap in the market for short-term loans.” He called on housing associations to set up their own lending facilities for social tenants.