People who take out payday loans are risking spiralling debt, distress and poverty, according to the chief executive of the Kingston Citizen’s Advice Bureau (CAB).
Pippa Mackie said the number of people in Kingston relying on companies such as Wonga for short-term, high interest loans was increasing – and said the Government’s recent welfare reforms would only make the problem worse.
And she urged people struggling with growing debt to seek advice from services such as CAB or a credit union.
Ms Mackie said: “I would say it is more of an issue and that we now see more people using payday loans.
“We are also very concerned that the welfare reform changes to monthly payments of universal credit, coupled with the single room subsidy and benefit cap will lead to people feeling pressured to take out payday loans or use loan sharks.
“The typical payday loan problems are difficulty in repaying and being persuaded to take a roll over loan, which quickly spirals into far more money being owed than the client can possibly repay.
“[We have also heard of] payday loan companies chasing or harassing clients to pay the debt, and lenders taking money from accounts so that when pay goes in it nearly all goes out immediately.
“Obviously all of these practices lead to stress, worry, a sense of hopelessness, poverty, lack of food, housing arrears, other bills mounting up, strains on relationships and illness.”
Mrs Mackie said organisations such as CAB could help by explaining individuals’ rights and negotiating with lenders, as well as offering a full financial advice service.
The backlash against pay day lenders has been growing steadily in recent months.
This week Surrey County Council banned access to 80 payday lending websites from all of its public access computers.
Last month, Archbishop of Canterbury Justin Welby announced the Church of England would drive payday lenders “out of existence” by supporting credit unions – although he was left embarrassed when it was revealed the church had helped fund Wonga.
But Michelle Boundy, chief executive of credit union SurreySave, backed Archbishop Welby’s sentiments. She said: “He has really put credit unions on the map within his own church and also nationally.
“He has done a lot to keep us busy in the last few weeks. We see the effects of payday lending. We see evidence of people getting in spirals of debt.”
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