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Growing payday loan debt requires tighter regulation, says CAB

The Citizens Advice Bureau has said that the number of people running up debt as a result of taking out ‘payday’ loans has quadrupled in the last two years.

Attracted by the simplicity of obtaining the credit and driven by the need to obtain cash before payday, over a million people take out small, short-term unsecured loans.

If paid back on time, these loans can be a useful way of getting through a tough financial month or two. However, the problems arise when the loan is ‘rolled over’ and interest rates of more than 4,000% kick in.

Peter Tutton from the CAB said the Government needs to take action and protect people as the current regulations are not up to scratch. He said the payday loan lenders need to understand that they cannot “treat people badly”.

Some commentators say the responsibility lies with the borrower. If they pay the loan back on time, they will not incur the steep interest as the loan will not roll over.

However, some people, especially those who have experienced significant debt as a result of payday loans, say that it is too easy to obtain the credit and therefore there is too great a ‘temptation’ to get into debt.

Using payday loans every month becomes a dangerous cycle, as does only paying off the interest each month. The CAB is calling for tighter regulation.

The Government is looking into payday loans and the current regulations, but Consumer Minister Ed Davey said it is preferable for people to obtain legal payday loans instead of going to illegal loan sharks, who are the “nasty of the nasty”, according to Mr Davey.

Related Links:

Read more on the story (BBC)
Find local debt and insolvency solicitors throughout the UK (Caven)

3 comments on “Growing payday loan debt requires tighter regulation, says CAB

  1. The problem with pay day loan lenders is that they do not carry out enough checks, they should make loan applicants show proof of income like bank statements and wage slips then go through the figures to see weather or not the loan applicant can afford to repay the loan

  2. Yes, you are absolutely right. Finance plays a dominant role in everyone life. Therefore it is mandatory to manage budget properly otherwise it creates a hurdles in personal life as well as professional life. No doubt payday loans are best option to manage emergency finance but it’s also a fact that its one of the most expensive way of borrows money.

  3. The Citizens Advice Bureau is saying right that. Payday loan debt requires tighter regulation. I always advise people to control unexpected expenses. People should start saving money, investing some money for their future. People should borrow this payday loan for very urgent requirements only.

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