164% surge in locals seeking debt advice over crippling payday loans
The number of people seeking help over so-called payday loan repayments is soaring in Northern Ireland with one debt advice project revealing a 164% rise in cases within six months.
The statistic comes as figures provided by the Citizens Advice Bureau (CAB) show that within a year the number of people it helped with the problem jumped from 2% of clients in 2011 to approximately 10% in 2012.
Interest rates of more than 4,000% are charged by some, and if loans are rolled over the amount owed can quickly escalate.
Some firms have been accused of pushing vulnerable people into "debt and despair".
The average payday loan debt in Northern Ireland is £574.
However, CAB said it has seen debts here as high as £5,000 for just one loan – showing just how much it can spiral out of control. Another person had accumulated 13 separate payday loans, totalling more than £3,000.
The Beat The Recession Debt Advice Project – led by CAB– revealed from July to December in 2012, the amount of clients going to the service with a loan problem increased by 164% in comparison to the first half of the year. The project, funded by The Big Lottery and run in partnership with Advice NI and the Law Centre NI, helped 21,525 people struggling with debt during 2011/2012.
Rachael Cray, CAB money advice programme manager, said Northern Ireland is showing a much quicker growth rate than in other areas of the UK.
Ms Cray added it wants CAB clients to help it hold payday lenders to account and has now launched a national survey to monitor whether payday lenders are sticking to their self-regulating charter. "Quick cash payouts can have damaging long-term consequences," she said.
"It is now just over a month after Christmas. CAB want sto send out this message – if you took out a payday loan or other form of credit that you cannot afford to pay back, contact us immediately for budgeting advice."
This week the Northern Ireland Assembly committee for enterprise, trade and investment, met to investigate payday lendings.
Committee chairman Patsy McGlone MLA said such lending schemes are becoming more and more popular.
"As such, it is important that the appropriate regulations and levels of regulation are in place to protect the consumer," explained the SDLP MLA.
"The committee is keen to work with local stakeholders to ensure this outcome is achieved."
The survey will run on the Citizens Advice Bureau's Adviceguide website at www.adviceguide.org.uk.
How do payday loans work?
Usually someone can borrow a few hundred pounds for a short time. The cash is often emergency borrowing to pay an urgent, unexpected bill.
What is the problem?
The loans are very expensive with very high rates of interest. Some charge interest rates of more than 4,000% – rolled over, debts can quickly escalate.