Speaking following the publication of new research today by R3, the insolvency practitioner and undertaken by ComRes which showed 5 million Britons could find themselves borrowing from payday lenders in the coming six months Stella Creasy MP said:
‘Today’s research from R3, the insolvency practitioner body, highlights the growing numbers of Britons who are now in hock to these lenders and the financial problems this is causing. I’m horrified to think nearly 1 in 10 are choosing to payback these loans rather than feed themselves, or pay for the energy bills. The public know these loans are toxic, but what choice do they have when they’re trying to keep a roof above their heads or pay to get to work?
With British gas bills set to go up at the end of this week and people’s pay-packets showing no sign of increasing to match the cost of living, little wonder these companies are able to push people into debt with this toxic type of borrowing. With 1 in 3 payday loans taken out to pay for other payday loans and 80% of them for basics, households need us in Westminster to recognise the strain they are under.
I warned ministers in 2010 that they were facing a debt crisis if they didn’t stop these companies exploiting our lax credit regulation- two years they have done nothing and millions more are now facing a debt laden Christmas and new year.
When the evidence is so clear of the problems now facing millions in our country it is simply inexcusable for the Government to refuse to act. They urgently must stop blocking legislation to cap the costs of credit and protect British consumers from these legal loan sharks.
I hope they will at least now vote for the amendment tabled by Lord Mitchell in the lords to the Financial Services Bill to cap what these firms can charge in 10 days time and give some hope to Britain’s hard-pressed families trying to make ends meet.’
1. A survey by Which? in November 2012 shows;
- Half (48%) of payday loan users have taken out credit that it turned out they couldn’t afford to repay.
- A third (29%) of payday loan users have taken out credit that they knew they couldn’t repay.
- In the last 12 months, more than half (57%) of people with payday loans have missed a payment and have incurred charges because of missed or bounced repayments (56%).
- 43% of payday loan users say it’s too easy to get credit.
- Almost a third (31%) were hassled by debt collection agencies in the past 12 months.
- One in ten UK payday customers have incomes of less than £11,100 per year and 46% have incomes of less than £15,500 a year.
- Research by WHICH? Showed that over 60% of people who took out payday loans were using the money to pay for household bills or buying other essentials like food, nappies and petrol.
- Payplan, a debt charity company, says that 47% of its clients had six or more payday loans in the last year alone. Most crucially, 86% of its clients were using the loans for basics—food, transport and the basic costs of everyday living, not luxuries.
- More than 5 million (5,205,237) GB adults say they are considering taking a payday loan in the next six months. This equates to approximately a 50% increase since this time last year, when it was around 3.5 million individuals.
- These loans are most likely to appeal to the younger demographic, with more than one in four (26%) of 18-24 year olds likely to seek a payday loan in the next six months. This is well above the national average across all ages of 11%, and 4% of those aged 45 and over.
- London is the UK region most likely to seek a payday loan in the next months, with 23% of Londoners saying they are likely to take one.
- In the past six months, 13% of the GB population have prioritised paying back these loans over traditional ‘essentials’, such as buying food, clothes or paying for gas and electricity. Specifically 7% have prioritised paying back these loans over buying food in the past six months.
- This figure is higher amongst younger ages groups, 12% of 18-24 year olds or 15% of 25-34 year olds have prioritised paying back a payday loan over buying food in the past six months.
3. Stella Creasy MP has been campaigning for caps on the cost of credit since 2010. You can find more details on her campaign here.
For more details on the campaign to tackle legal loan sharking in the UK visit Stella Creasy MP’s website www.workingforwalthamstow.org.uk ; or call 020 8521 1223.