Warning over ‘payday loans with no pay day’
One in 20 unemployed people counselled by us last year had pre-existing payday loan debts that they were struggling to repay.
A total of 1,243 unemployed clients (5.6 percent) held at least one payday loan, owing an average of £918 in this type of high-cost, short-term borrowing.
The charity has warned that payday loan difficulties are growing amongst the unemployed, with an increasing number of jobless people seeking help with pre-existing payday loans taken out while previously in work.
- This number has increased more than four-fold from 283 people in 2009 to 1,243 in 2011
- In the same period, the total number of unemployed people we counselled remained persistently above 20,000 (22,350 in 2011, 25,388 in 2010, 23,428 in 2009)
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. Payday lenders must recognise this growing problem.
When the industry announces new codes of practice in November 2012 we will expect to see clear commitments to freeze interest and charges when borrowers experience a shock to their income that leaves them unable to repay.
Crucially, payday lenders must also commit to work with debt charities to set up affordable repayment plans when any borrower finds they are in difficulties.