Which? executive director Richard Lloyd said:
“Millions of people are increasingly reliant on high cost loans to pay for essentials or to repay other debts but the Government and regulators must go further to clean up the wider credit market.
“We support the Financial Conduct Authority’s plans to get tough with rogue payday lenders, however action must also be taken to clamp down on excessive charges and irresponsible lending across the board.”
Notes to editors:
1. The Financial Conduct Authority (FCA) must make sure borrowers are being treated fairly whatever form of credit they use. For example, as part of our Clean up Credit campaign we found that High street bank overdraft charges can be just as eye-watering as payday loans and people could spend £100 in charges for going £100 into an unauthorised overdraft for a month.
2. Which?’s latest consumer tracker shows:
- Nearly half (48%) of people are worried about their household level of debt.
- 4% (around 1 million households) take out payday loans each month.
- Younger people are more likely to use payday loans – 7% of 18-29 year olds and 6% of 30-49 year olds took one out last month.
- Borrowing £100 for 31 days costs £30 with some high street banks, and between £20 and £37 with a payday loan company.
- It can cost £100 in charges for going £100 into an unauthorised overdraft for one month.
- Halifax and Santander current accounts had the highest overdraft charges.
4. Previous Which?’s research on credit found that:
Eight in ten of us (79%) – around 38.5 million adults – use some form of credit
Four in ten (38%) of people who take out payday loans use them to pay for essentials like food or fuel.
A quarter (24%) of people with payday loans use it to repay other credit.
Over half of payday loans users (53%) told us that every month they run out of money before the end of the month.
Seven in ten (69%) of payday loan users have regretted taking out credit in the past and half (49%) of payday loan users have taken out credit it turned out they couldn’t repay.
Three in ten (28%) of credit users say they don’t like debt but see it as a necessary part of their life.