Payday lending is constantly rising, leaving people in ongoing cycles of debt
According the Financial Conduct Authority, in the year up until June over 5.4 million payday loans were taken, in comparison to 4.6 million in the previous year. This was 0.8 million more than the previous year. As well as this, the amount that people have borrowed has risen between July 2016 and June 2017 from 1.1 billion to 1.3 billion.
The Financial Conduct Authority have also said that the numbers on lending have fallen significantly since 2013, however in the last couple of years they have begun to rise again.
According to the data taken by the FCA, the majority of the people who borrow money to take out payday loans are the younger sector of the population. They discovered that almost 40% of all people taking out loans were of the age 25 to 34. The majority of these were either living with their parents or tenants.
The data also states that people who live in the North West of England are the most likely people to take out a payday loan (Source: WageDayAdvance). With a figure of around 125 loans per 1,000 adults. After the North West, the next area with the most payday loans taken out was the North-East of England. In this area, there were about 125 loans per 1,000 adults.
The FCA have also said that people living in London borrow the most amount of money. They take out loans on average around 284 pounds compared to 234 in the North West of England and 235 in the North East.
People who do take out payday loans tend to have problems in paying them back and sadly end up in an ongoing cycle of debt. A report from the debt charity StepChange has stated that in 2017, 15.7% of their customers had a debt to pay off as a result of short term high cost credit debt or payday loans. This figure has further risen to 18.3% in the first half of 2018.
A representative from StepChange has stated that the figures released by the FCA have shown that payday lending is constantly rising, leaving young people who are financially stretched turning to high cost credit loans. The charity is encouraging people to seek advice from them before turning to these high cost credit loans to try and solve their financial problems.
4 years ago, the Financial Conduct Authority launched their price cap on pay day loans, at 0.8% per day on the amount that had been borrowed by the customer. The aim is to ensure that no one ends up paying back more than twice of what they have borrowed. As well as this, they have stated that default charges cannot be any higher than 15 pounds.
Although interest rates have been capped, people who take out payday loans to help their financial situation still end up facing average rates of interest of around 1,250% percent. The cap has also led to a fall in the number of providers of short term and payday loans that are available. It has fallen from 106 firms in 2016 to 88 firms today.