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Financial difficulty due to pay day loans up 42%


The number of people in financial difficulty due to pay day loans has risen by 42% in the last 6 months, according to StepChange debt charity.

The charity dealt with 43,716 people in financial difficulty due to payday loans and £72,210,340 worth of debt in the first 6 months of 2014, up from 30,762 people and £51,227,222 worth of debt from the same period last year.

These figures demonstrate an increase in the number of people getting into difficulty due to pay day loans. The charity is now calling for the Financial Conduct Authority (FCA) to take further action to ensure better protections for financially vulnerable consumers.

StepChange debt charity chief executive Mike O’Connor said:

“Today’s figures show that the payday market all too often fails to treat customers fairly, especially those in financial difficulty.
High-cost short-term credit is rarely the answer to financial difficulties. While, the FCA’s proposed price cap is a crucial step forward, there is still much work to be done to ensure that payday loans can no longer plunge people into a cycle of unsustainable borrowing and entrenched financial hardship.
Consumers will continue to need access to short-term credit and FCA action should also stimulate the reform of this market. This needs to include problems in the adjacent markets including overdrafts, logbook loans and home credit where consumers also suffer detriment. The goal of an affordable lending market treating consumers fairly will also involve others but the FCA has a critical role to play in creating the right environment.”

The changes StepChange are proposing include a default cost cap, a real time database to ensure lenders have up to the minute information on a borrower’s situation and to help with repeat and multiple borrowing, and bringing default fees in line with other sectors.

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