Payday loan customers quadruple in two years

The Citizens Advice Bureau says that over the last two years, there has been a four times increase in the number of people who have taken on debt from payday loans, as reported by the BBC.

A payday loan is short-term credit that you can borrow until your next payday. If the debt is repaid by then, these loans can work out cheaper than some unauthorised overdrafts or credit card charges. However, if the loans are rolled over to the next month, the interest can mount up.

CAB is calling for tighter regulation of the industry. However, Ed Davey, the Consumer Minister is concerned about illegal lenders 'preying' on those who can't obtain credit this way.

He commented: "The Labour government looked at capping interest rate costs of credit three times [and] rejected it three times because they were concerned that they would push vulnerable consumers into the hands of these illegal money lenders, who are really the nasty of the nasty."

A spokesperson for debt management company Gregory Pennington commented: "Payday loans are a unique kind of debt - the APR (Annual Percentage Rate of interest) can be very high. However, over the short term, and when repaid promptly, the loans can be a convenient alternative to some other forms of lending, especially when other options are not available. It's important to repay the payday loan promptly to avoid the interest charges."