Number of people seeking help for payday loan problems doubles and average debts exceed monthly pay of borrowers

The number of people seeking help with payday loan problems from Stepchange almost doubled in the last year, the debt charity has revealed.
The benefits of the UK's recovering economy are not filtering down to those with squeezed budgets as 66,557 people sought help with their payday loan debts from Stepchange in 2013 - an 82 per cent rise on the 36,413 who did the same in 2012.
The average client held three different payday loans and owed £1,647 in total, suggesting they are letting their debts mount up by 'rolling over' their loans to the next month.

Trouble: The number of people needing help with payday loan debts almost doubled in 2013.

Mike O'Conner, chief executive of Stepchange, said: 'The widespread harm and misery caused by payday loans continue unabated.
'The industry has failed to address the problems causing untold misery and damage to financially vulnerable consumers across the UK.'

While some of the rise in calls could be attributed to people becoming more aware of debt charities like StepChange or Citizens Advice, the sheer size of the rise suggests the proliferation of fast and astronomically expensive short-term loans has not been checked.
This could potentially change once the Financial Conduct Authority brings in the cap on interest and charges announced by Chancellor George Osborne in November, as well as imposing new rules on affordability checks carried out by payday lenders.

 

StepChange says the importance of affordability cannot be understated, given that the average income of clients seeking help is £1,381-a-month, less than the amount they owe in payday loans, suggesting that some people are being allowed to borrow without the appropriate checks.
With interest rates running into the many thousands of per cent, the amount a person owes can multiply quickly, particularly if the loans are allowed to roll over. One StepChange client saw his £200 loan rise to £1,851 in the space of just three months.
And those taking out payday loans have other debts to contend with too - with 62 per cent having overdraft debts, 60 per cent credit cards, 45 per cent personal loans and 39 per cent catalogue debts to pay off.
In total last year, the charity handled clients with 202,233 payday loan debts totalling £110million, up from £60million in 2012.
Mr O'Connor said: 'We hope the FCA's proposals will address some of the areas of consumer detriment, but on issues such as affordability checking, rollover and repeat borrowing, there is an urgent need for even more radical reform.'