The U.K. is Battling Payday Loans Just Like Us
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UPDATED: Mar 28, 2012
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Payday loans and the problems they cause are not exclusive to the United States, as the United Kingdom has found itself in a heated battle with the short-term financing lenders that are popping up all across their nation.
“I couldn’t tell anyone—it swallowed me up whole,” said Steve Perry, a 30-year-old British administrator who took out a single payday loan that ballooned into a $34,800 debt obligation within just 18 months, reported Outcome Magazine. “I sat in my car and cried my eyes out.”
Perry had never heard of payday loans, but he needed some extra cash for a weekend trip, he came across this short-term lending service online.
The U.K. has seen this type of borrowing increase dramatically within the last few years. The statutory watchdog Consumer Focus told Outcome Magazine that the number of payday loan vendors in Britain quadrupled between 2006 and 2009. During those same years, over 1.2 million borrowers took out an estimated £1.2 billion—the equivalent of $1.9 billion.
“We’ve got hundreds of thousands of people who use payday loans really successfully,” said John Lamidey, chief executive of the Consumer Finance Association, a trade association that represents U.K. payday lenders, as reported by Outcome Magazine. “[Borrowers] know up front how much it’s going to cost… it’s so simple, so easy and people like it.”
Lamidey says the borrowers don’t have problems with payday loans, but instead campaigners do—those looking to steer the public approval spotlight onto themselves.
One borrower named Howard told Outcome Magazine that he took out a meager £250 payday loan, and has been forced to roll it over every month since, now struggling with £800 bills. He approached his lenders about establishing a manageable repayment plan, but none wished to work with him.
Now he fears he will lose his home.
Lamidey claims lenders responsible for propelling individuals down these debt spirals are rogues and not true representations of his industry. He believes these rogues will inevitably go out of business.
Since Perry fell into his massive debt trap, he’s slowly begun to regain control of his life.
He now fights against the payday loan industry and is working with other consumer advocated to establish stricter short-term lending laws. He is seeking to limit the amount of rollovers, the relaxed lending standards, and the amount of interest that these lenders can charge.
Due to sharing his story with the media, Perry has also found his payday loan lenders have grown far friendlier—some even cancelling his remaining debts.