Payday lenders still hold sway in NW

By April 15, 2014Finance, News

Payday loans are three times as popular as loans from credit unions amongst people in the North West, according to a new report by R3, the insolvency trade body.

In a survey by R3, 6% of North West adults questioned said they had taken out a payday loan in the last six months, compared to 2% who said they had had a loan from a credit union.

Richard Wolff, North West regional chair of R3 and Head of Corporate Recovery and Insolvency at JMW Solicitors in Manchester, indicated that the figures showed that credit unions were still not ready to rival payday lenders.

“Credit unions are often touted as an alternative to payday loans but on this evidence they have a lot of catching up to do,” he said.

“Payday loans have become one of the default options for those trying to tide themselves over from one month to the next but there really do need to be alternatives. While high-cost, short-term credit might be helpful in some circumstances, payday loans are not a long-term option. They ultimately only dig people with debts into deeper holes.”

According to R3’s survey, 5% of people in the North West said they expected to take out a payday loan in the next six months, compared to 12% a year ago.

Richard Wolff added: “While the appeal of payday loans may have dimmed, a significant number of British adults still feel that payday loans are their only option to make ends meet from one month to the next.”

The survey results follow the introduction last week of new and tougher rules on payday lending. The Financial Conduct Authority, which has taken over from the Office of Fair Trading as the sector watchdog, has warned that payday lenders will be shut down if they do not comply.

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