Member Article

Payday loans force unemployed further into debt

Payday loans are forcing increasing numbers of unemployed individuals further into debt, a charity has revealed.

According to the Consumer Credit Counselling Service (CCCS), there are no specific rules preventing lenders from offering short-term high interest loans to unemployed individuals. They are now urging the industry to offer more protection to individuals who are out of work, calling for affordability checks to be carried out to ensure that borrowers have the ability to repay the loan.

Payday loans are becoming increasingly common, but high interest levels mean that individuals are often forced even further into debt.

According to the CCCS, one in 20 individuals who they work with already have pre-existing payday loans which they were already struggling to repay.

Since 2009, the number of individuals approaching the CCCS for help has quadrupled, despite no sign of an increase in the number of unemployed people looking to them for help.

Commenting on the problem, Delroy Corinaldi from CCCS said: “Unemployment is the biggest single driver of debt problems in the UK, and people who have lost their job after taking out extremely expensive payday loans are finding it particularly difficult to cope.

They also believe that the figures should serve as a warning to anyone considering taking out payday loans, and consumers should consider whether they can afford to repay the high cost of credit following a shock to their income from an unexpected event.

Later this week a new code of conduct is expected to be announced, and is likely to include commitments aimed at preventing an unmanageable debt for consumers.

This was posted in Bdaily's Members' News section by Ruth Mitchell .