Payday loans providers 'must be cracked down on'

28/07/2008

The payday loans sector must be more tightly regulated, debt advice groups have insisted.

National Debtline and Debt On Our Doorstep called for the Office of Fair Trading to take action, after customers complained that they have borrowed money at AERs of up to 2,000 per cent.

Payday loans are advanced when a borrower is given cash against a post-dated cheque, which will then be cashed within a short period of time; they are so called, because they are commonly used by customers to tide them over financially before payday.

Speaking to the BBC, Beccy Boden Wilks pointed out that the loans tend to appeal to customers who could not get cheap mainstream credit, and could prove "quite expensive".

Damon Gibbons at Debt On Our Doorstep also said that he wanted the sector to be investigated "immediately" by the OFT.

"We believe there is a lot more they could be doing to curb the worst excesses of the payday industry," he said.

Commenting on the recent rise of the payday loan, EuroDebt director Kevin Still added: "Payday loans have evolved rapidly in recent years from traditional pawn brokers and local cheque changers to large global consumer finance companies.

"[This is] partly because of the rise in the number of foreign workers, and largely due the increasing shortfall most consumers on lower incomes are experiencing between meeting committed payments and the timing of their wages or salary."

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