UK Report Paints New Picture of Payday Loan Borrowers
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UPDATED: Feb 8, 2021
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A recent report argues that payday loan borrowers in the UK are tech-savvy and financially literate, countering reports that paint borrowers as vulnerable.
The “Credit Crunched” report, the result of a survey conducted by the UK’s Consumer Finance Association, which represents short-term loan lenders, analyzed the finance needs of three age groups: millenials, middle-aged adults and retiring baby boomers. The report found that technology played a large role in borrowers’ financial knowledge and expectations.
In a statement released by CFA, Russell Hamblin-Boone, the Chief Executive of the Consumer Finance Association, said “Each of the groups identified in the report need to access money at short notice. UK households have reassessed their finances and are looking for new ways to manage their money. Smartphones and online services are such a big part of life that it is inevitable that technology is having an increasing impact.”
In America, the poverty threshold for a single individual is $11,702. The “Credit Crunched” survey found that, of those who responded, 17 percent made under £10,000, or $15,171, a year.
Payday loan lending has recently come under fire in the UK, following a string of suicides committed by deeply indebted payday loan borrowers. Antony Breeze, 36, set himself on fire after repeated calls from payday loan lenders. Kenny Davies, 23, hung himself in the woods near his home after a neighbor refused to co-sign an additional loan for him.
The UK’s Office of Fair Tradition produced a report in March condemning the country’s payday loan industry. In an overview of the report, the OFT wrote “We are particularly concerned by the evidence of irresponsible lending; too many people are given loans they cannot afford, and when they can’t repay are encouraged to extend them, exacerbating their financial difficulties. This is causing real misery and hardship for a significant number of payday users.”
The OFT found that a third of all payday loans in the UK are repaid late or never repaid at all. And although payday loans are meant to be short-term arrangements, the industry makes 50 percent of its profit from the 28 percent of loans that are refinanced.
The “Credit Crunched” survey, possibly released in response to the OFT report, found that harsh economic conditions set the stage for the country’s current attitudes toward spending.
As the buying power of stagnant wages fades and savings erode, the report said families are less prepared to handle unexpected expenses. And while a Pew report found that most American payday loan borrowers use the loans for everyday expenses, the “Credit Crunched” report ties reduced access to traditional loans to a rise in payday loan borrowing.