An increasing number of consumers are falling prey to shady marketing tactics f payday loan companies along with a lack of information which should be given on free debt advice. According to a recent survey conducted by Which?, more than 60% of consumers who had taken a payday loan responded that they had needed the money for food or bills. Some even reported that they simply needed petrol or nappies.
According the consumer watchdog, this is indicating an ‘alarming’ number of people who are being trapped by extortionate penalties for being late when they are unable to make repayments timely. At least 25% of those surveyed stated that they were subjected to hidden charges which should have been transparent at the outset.
One example of hidden charges is the fees attached to reminder letters. As well, approximately 18% stated that they had been unable to pay back their payday loans on time. A reported 33% of borrowers said that this led to even greater financial problems and almost one-half of respondents said they indeed had been hit with charges which were totally unexpected.
As a result of this, Which? is calling for the OFT (Office of Fair Trading) to begin enforcing rules that are already in place in terms of credit/lending practices. These rules pertain to the default charges which can be attached by payday loan companies and with over 1.2 million people having taken a pay day loan in 2011, these practices need to be better monitored. This is according to a statement by the executive director of Which?, Richard Lloyd.
Consumer Focus finds that this information brings up some very troubling aspects of payday loans, which is a rapidly growing sector. They have had ongoing concerns over the behaviour of these firms because they feel consumers are not being safeguarded due to inadequate government regulations.
