Payday loan firms should be ashamed
With rising living costs, changes in the welfare system and freezes in salaries, we are seeing more and more people turn to payday loan companies. The results are devastating. Shelter recently found that two-thirds of the population are struggling to pay mortgages and loans and a million people are turning to pay day loan firms – some of whom charge up to 1,700 per cent in interest rates according to Which?
Many people may wonder who would accept a loan on such terms. But when a person has children to feed and clothe, and a mortgage to pay to ensure they have a roof over their heads, I can assure you that desperation will often win over logic. The firms who offer loans on such terms to such distressed people are the ones who should hang their heads in shame.
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For so long these firms have been able to get away with making an appalling amount of profit from desperate people having so little.
I constantly work with clients who have found themselves in dire situations after being offered loans they had no hope of repaying from such companies.
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The number of people coming to us for help with fees for debt relief orders has risen by 73 per cent over the last year. Many of these people have debts with precisely these payday lenders.
A 30-year-old man recently came to us having been made redundant from his job of eight years.
His relationship broke down and he had to leave the family home. He had an income of £71 job seeker allowance and £57 housing benefit.
His rent was £98 per week and he needed £20 for utilities a week, which left him only £10 a week for food. He had run up a considerable amount of debt – including pay day loans – just to live.
People who turn to pay day loans are ordinary people with nowhere else to turn.
The cumulative effect of the welfare reform changes coming into force from April 1 will inevitably see more and more vulnerable people turning to payday lenders to make ends meet.
In particular the lack of provision at a local level for crisis loans will only drive the most desperate to these lenders for short-term help at the highest of costs.
What we need is a fairer system that does not penalise those who have very little by ensuring they have even less.
The Office of Fair Trading's investigation of payday loan companies is a good start, but a lot more needs to be done to ensure protection of the most vulnerable in society against such loans.
Susan McEniff is manager of marketing and fund-raising at Leicester Charity Link
6 Comments
by Graham_LE8
Saturday, March 09 2013, 4:23PM
“There are many aspects to this situation and whilst the lenders are somewhat immoral, they are not the sole 'villains' of the piece.
Most customers of these companies are driven by what they perceive to be urgent or dire need; But in reality it is society that creates the urgency behind that level of need, by either withdrawing social support to a point beneath an essential level (as in the case of the man left with £10 pw for food expenditure), or having placed them under pressure from our all-encompassing 'got-to-have-it-now' instant gratification consumer culture.
Neither viewpoint is attractive nor should be tolerated, no-one in an advanced society like ours should be wanting for sustenance, and similarly there should be no disgrace in not having a 42" HD TV, microwave oven, laptop, or iphone - yet both situations are accommodated, if not covertly encouraged. Driving people to a food bank should be as equally abhorrent as the continual reinforcement that the latest aquisition = degree of social acceptance and success.
I think we've lost our way somewhere, but the pay-day lenders aren't to blame for this predicament, they are a product of it...”
by 4_Stroke
Saturday, March 09 2013, 3:45PM
“Are they trading on the misfortune of others or are people really so stupid as to no know what they are signing up to. They tell you how much you have to pay back over how long. Maybe some folk are just not used to dealing with the consequences of their actions in this nanny state.
As far as naming and shaming, they already are, they advertise every day on TV along with their interest rates.
If you can't afford to pay it back, don't borrow the money. It's not rocket science.”
by reubedube
Saturday, March 09 2013, 1:01PM
“"Payday loans are often made to folk who have no assets and poor credit history ", so let's 'rip 'em off ! What a way to make a living.
These money lenders, like the 'no win, no fee' lawyers, are simply greedy immoral people out to make obscene profits by trading on the misfortune of others.”
by agewait
Saturday, March 09 2013, 11:54AM
“"Payday loan firms should be ashamed" They should be, but they are not! They are blood-sucking leeches preying on the vulnerable and charging outrageous APR - They should be Named, Shamed, and Prosecuted - Loan sharks nothing more, nothing less!”
by Eastonian
Saturday, March 09 2013, 11:10AM
“I agree these 'PayDay Loan' companies who have come out of the woodwork in these times of great austerity are a despicable lot imposing 1000%+ interest charges.
However, there are two sides to every story and it's a great shame that their "customers" a) don't read the small print and b) understand what they are exposing themselves to.”
by 4_Stroke
Saturday, March 09 2013, 9:43AM
“Unfortunately it's about managing risk. Payday loans are often made to folk who have no assets and poor credit history so the risk of default is very high. These people are turned away by the banks for this very reason. Remember that's its subprime loans that bankrupted much of the banking business, those are the business risks in making these loans.”