Thousands still struggling with payday loan debts
Many people are still struggling with problem payday loan debts despite a clampdown on irresponsible lending in the sector, a charity has warned.
StepChange Debt Charity said it helped 28,000 people with payday loan debts in the first six months of 2016 - and over a third (37%) of them had three or more such debts. The average amount owed was £1,380.
The charity has urged the Financial Conduct Authority (FCA) to “finish the job” of tackling the problems.
In January 2015, the overall cost of a payday loan was capped, as part of moves to stop fees spiralling out of control and make costs clearer to consumers.
But StepChange said its evidence suggests some borrowers are being given loans without a full understanding of whether or not they can afford them.
A survey of 500 of its clients who had taken out payday loans after the regulations found more than a quarter (26%) did not think their lender took reasonable steps to check they were able to afford to repay. Only 19% had only a rough idea of how much they would have to repay, while 6% claimed they did not know.
After telling their lender they were struggling to repay, 21% said they continued to have charges and interest added to their debt and less than a third (29%) said they were given an affordable repayment plan.