Fears grow of payday loans crisis as St Helens CAB warns it sees one debt victim a day (From St Helens Star)
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Fears grow of payday loans crisis as St Helens CAB warns it sees one debt victim a day
ONE new debt victim a day is approaching St Helens Citizens Advice Bureau for help after being being sucked into a cash crisis over payday loans.
Extortionate interest rates and penalties attached to the loans - taken out in most cases by townspeople desperate to buy essentials such as food, nappies and fuel - are leading to unscalable debt mountains.
The past year has seen the CAB, based at the Millennium Centre, inundated with clients seeking help.
Debt advisors are seeing at least seven new payday loan clients a week and the majority of 60 regular debt customers are entangled with loans.
Those affected range from the jobless and low paid to professionals.
Karl Pearce, manager at the St Helens CAB, said: “Payday loans are one of our main focus with clients in the town. Some people are going to drastic measures just to survive financially and have resorted to the foodbank as a last resort.
“The issue we are finding is vulnerable people are being targeted by payday lenders and are taking out loans to settle other debts.
“The bedroom tax has been an outstanding factor in this as people are feeling forced between a choice of which debt to pay.”
In many cases the CAB found that it is the Continuous Payment Authority (CPA), rather than high interest rates that are main problem with the loans.
CPA comes into effect if a repayment is missed and allows lenders to withdraw funds from a customer’s account without the need to seek authorisation each time.
In a case provided by the CAB a 23-year-old single mother applied for loans to buy essentials such as food and nappies.
In another example, a 28-year-old St Helens man in full-time employment was granted a loan despite no checks being made into his ability to repay.
After providing the lender with direct debit card details, the company began to take payments out of his bank account until he was left with nothing.
Another example told how a 33-year-old father who was forced to cease work following a relationship breakdown, applied for loans worth £4000 with payday companies.
With one of the lenders the interest stood at £250, however that swiftly mounted to £2500 causing the debt to have a knock-on effect with other repayments.
Kath Inkpen, social policy coordinator at CAB, said: “While there is a majority of unemployed and vulnerable people taking out these loans, there are many people in work who are feeling the need to get money to resolve other debts.
“What we are trying to work towards is resolving clients’ often drastic situations and advising them that there are other options when it comes to lending.”
Last year independent consumer magazine Which? revealed that 48 per cent of people who take out payday loans cannot afford the repayments
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