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Debt helpline sees 94% increase in payday loan calls

Joanna Faith
Written By:
Joanna Faith

More than 20,000 struggling consumers called a charity debt helpline for advice with payday loans in 2012, it has been revealed.

This was a 94% year-on-year increase and a rise of 4,200% since the start of the financial crisis in 2007, according to the Money Advice Trust.

The charity also revealed in January this year, its National Debtline took a call for help with payday loans for every seven minutes its phone lines were open.

Payday loans have come under intense scrutiny in recent months. In November, a Citizens Advice Bureau report said people falling into serious debt problems with payday lenders had more than doubled over a year.

Meanwhile, in September, a TV advert for payday loan company was banned by the Advertising Standards Authority following a complaint from a viewer who challenged whether the representative example and APR rate were “sufficiently prominent.”

The Money Advice Trust is now calling on the Office of Fair Trading (OFT) to make use of new powers to suspend consumer credit licences with immediate effect where it identifies persistent bad practice.

Joanna Elson, chief executive of the Money Advice Trust, said:

“Payday loans have come from nowhere to be one of the most common debt problems people face. In 2007 as the financial crisis began National Debtline took just 465 calls for help with payday loans, but last year that figure had grown to 20,013.

“The rapid emergence of payday lending has caught regulators a little off guard. We have waited some time for real action to be taken to help prevent people falling into a serious debt spiral with these loans. We encourage the OFT to protect consumers by suspending the licences of those lenders shown to persistently break the OFT’s own guidance on debt collection.

“National Debtline advisers help around 100 people every day to deal with payday loan debts, some callers have taken out as many as 80 such loans. Borrowing on this scale can have serious ramifications if not dealt with properly, and advice services like National Debtline risk becoming over burdened by the proliferation of payday loans.”

The results of an OFT investigation into several payday lenders over aggressive debt collection practices are expected next week.