Consumers escape payday spiral

These figures come after numerous reports of payday loans trapping customers in downward spirals of debt and further difficulties: GE Money's recent announcement that they will no longer consider mortgage applicants with a history of payday lending was followed by figures from The National Debtline, showing the number of calls regarding help with payday loans doubled to 9,500 in the first six months of 2012. But while many are trying to escape the payday spiral, more are becoming vulnerable to falling into the trap, with research this week showing 16 per cent of British households are struggling to cover their bills and debt from their income.

While the steep rise in debt consolidation applications to Amigo Loans suggests awareness of alternative, safer options is on the increase, the extent of the damage continuing to be caused by payday lending is also more apparent.

James Benamor, CEO of Amigo Loans, says:

"We're experiencing a record-number of applications from customers who have fallen into the payday trap. What started off as a bit of extra cash to see them through to payday has turned into a mountain of rolled over loans, unmanageable debt and extortionate charges.

"The threat of payday loans for millions of people continues to grow. Irresponsible lenders are failing to consult borrowers adequately. With many trustworthy people locked out of the banking system, payday loans are often thought to be the only option available. But without stringent affordability checks, these lenders are acting irresponsibly. Consumers need to be aware there are cheaper and safer options beyond payday."