Payday loan debts continue to worsen

Published by Mark King on 12 July 2013.
Last updated on 12 July 2013

The number of borrowers getting into difficulty with payday loans is growing, according to a leading debt charity.

In the first half of 2013, StepChange Debt Charity said it helped 30,762 people with payday loan debts, nearly the same amount as during the whole of 2012, when the charity helped 36,413 people.

While the amounts owed have only risen fractionally – an average of £1,665 owed compared to £1,657 in 2012 – the number of people with five or more payday loans continues to mushroom.

Between January and June this year, StepChange helped 6,663 people with five or more payday loans – compared to 7,221 people during 2012 as a whole.

Head of policy Peter Tutton said: "The problem of payday loan debts continues to worsen despite the introduction of new codes of practice by the payday loan industry. The fact that we are still seeing increasing numbers of people with five or more loans and clients with loans in excess of their monthly income clearly shows that payday loan companies are still failing to lend responsibly."

The charity's figures come on the same day as an industry survey by insolvency trade body R3 indicates that the payday loans bubble may be bursting. According to R3, the number of people who said they were planning on taking out a loan in the next six months fell to 7% – down from 11% from the last survey of this type in October 2012.

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StepChange hopes the High Cost Credit Bill – due to have its second reading in Parliament on 12 July 2013 – offers an opportunity to address the worst excesses of the payday loan industry and establish a specific set of proposals for the FCA when it assumes control of the market in April 2014.

"Financially vulnerable consumers have been inadequately protected for too long," adds StepChange's Tutton. "What is needed now is a clear plan from politicians, regulators and the payday loan industry that will deliver demonstrable evidence of positive change in the market by the end of the year".

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