Payday lending rate cap welcome but far from the whole solution

News that the Government is to introduce further controls on payday lenders, designed to “cap the overall cost of credit”, has been welcomed by Debt Advice Foundation.  But the charity warns that the real harm is done by the aggressive marketing techniques of the industry, which pressures people struggling with debt to take out more and more loans.

Chief Executive David Rodger said: “Of course these rates that top 4000% APR are outrageous – but it is the unrelenting cycle of charges and pressure to borrow more that sends many families into a spiral of unmanageable debt. 

“We rarely find people are dealing with just one payday lender when they come to us for advice – they will have outstanding loans with five or six, some of them from the same parent company.  They are remorselessly encouraged to take out a new loan if they haven’t been able to keep up payments on their first one – bombarded with texts and emails about the outstanding debt and with offers of new loans as a so-called solution.

“A short-term loan is not suitable for many people that are in financial difficulty and that use these loans to stave off the inevitable.  The payday industry has an obligation to assess the borrower’s creditworthiness robustly and to provide them with details for free sources of debt advice if they are struggling financially.

 “We are delighted that the Government and the regulators are getting to grips with the sector – but we want them to understand the full experience of people who find themselves caught up with payday lenders.”

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