StepChange Debt Charity response to CFA report: Payday loans decreasing but more action required to tackle financial distress
21 July 2015
In response to the publication of the CFA “Credit 2.0” report, Peter Tutton, Head of Policy at StepChange Debt Charity said:
“The proportion of clients we are seeing with payday loans among their problem debts has fallen significantly, from 24% a year ago to 16% now. This is largely the impact of regulation, and is very welcome. The important and necessary steps taken by the Financial Conduct Authority are starting to clean up problems in the payday loan market
but we are concerned about the affordability and sustainability of some of this lending. The payday loan market is being reformed, but the job isn’t done.
“We need alternatives to high cost credit that will help people get through financial difficulty. The introduction of statutory ‘breathing space’ protection would give people in temporary financial difficulty respite from spiralling interest, charges and enforcement action by creditors. 21% of people who told us they did not get the help they needed from their creditors took out a payday loan as a consequence.
“A Government review of our ‘breathing space’ proposals was promised earlier this year and we look forward to an announcement about the timing of this review.”
StepChange Debt Charity figures also show:
- The average payday loan debt we see is still nearly 40% of the average monthly income of clients with payday loans
- Of those clients with one or more payday loans: over a third still have three or more, nearly a quarter still have four or more, and 13% have five or more.
- The average total payday loan debt is still 96% of the average monthly income of clients with payday loans.
- The average total debt of our clients with payday loans (£9,693) has grown since the first half of last year.
Peter Tutton continued:
“We need to deal with the affordability and multiple loan issues in the payday sector and to find better ways of helping people in financial difficulties.
“Tighter regulation on payday has not made other kinds of debt worse. Firms have themselves acknowledged that the market needed to change. What we now need is a wider ‘resilience’ strategy to help people make it through financial difficulty triggered by life shocks like serious illness, relationship breakdown or job loss – the highest causes of severe debt amongst our clients.