Crackdown planned on the payday loan sector

Consumer campaigners are asking that a crackdown occur in order to make the credit industry much more accountable for their actions after finding out that about 25% of those who take out payday loans at high APRs do so in order to pay for other debts.

Watchdog group Which? explained that many borrowers that cannot receive any credit from mainstream sources become so credit for extra funds that they end up getting a series of high cost loans and end up stuck in a cycle that they cannot get out of.

A survey conducted by the consumer group found that about 25% of all people that get payday loans were using the funds in order to pay other debts and about half of those only turned to a pay day loan after they were rejected to receive credit from a more legitimate source.

Out of the credit users that were included in the study, over three-fourths stated that they had credit cars while another 33% had an overdraft and one out of every six held a personal loan. On average about one out of 16 credit users had used a payday loan and another one out of every twenty had received an unauthorised overdraft.

Which? explained that many households are starting to become dependent on payday loans just to pay their simple bills and about half of the people that own a credit card are accumulating debt just to pay essential living costs such as household bills and rent.

As a result of the survey, Which? has asked the Government to make sure that the Financial Conduct Authority takes quick action to regulate the lending practices of payday loan providers to make sure they are fair and just so that people do not end up scammed and in more debt.

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