With rising living costs, changes in the welfare system and freezes in salaries we are seeing more and more people turn to pay day loan companies, the results of this 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 who 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.
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.
The number of people coming to us for help with fees for Debt Relief Orders has risen by 73% 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, £20 for utilities a week which left him only £10 a week for food. He had run up a considerable amount of debt – including payday loans – just to live. People who turn to payday loans are ordinary people with nowhere else to turn.
The cumulative effect of the Welfare Reform changes coming into force from April 1st 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 our society against such loans.