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Payday lending Charity hit by 82% rise in debt advice requests

February 27, 2014

The number of people with payday loans seeking debt advice from the charity StepChange leapt by 82% in 2013 compared with the year before.

The charity said 66,557 people struggling with high-cost, short-term loans totalling pounds 110m sought help last year against 36,413 with a combined debt of pounds 60m in 2012.

The figures have prompted renewed calls for tougher reform of the payday loan sector when the Financial Conduct Authority takes charge of regulating it in April. The FCA has already said it will limit the number of times a loan can be extended, and the government has also tasked it with setting a cap on the amount lenders can charge.

According to StepChange, people seeking advice in 2013 held an average of three payday loans, but about 13,800 had five or more. The average debt was pounds 1,647, significantly more than the average client's monthly income of pounds 1,381.

The charity said it still sees numerous cases in which debts were inflated through the application of interest and charges. In one case, a man's pounds 200 debt grew to pounds 1,851 in three months.

Payday lenders such as Wonga and the Money Shop offer loans of between pounds 100 and pounds 1,000 over days or weeks, and argue that because borrowing is designed to be short-term the costs involved are no higher than charges of mainstream lenders. Harriet Meyer

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Source: Guardian (UK)

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