The debt owed by people taking out payday loans in one of Fife’s most deprived areas has soared by more than 80% in the past year.
Figures released by StepChange debt charity show that people in central Fife owed an average of £1,220 when they contacted the organisation for help last year an increase of 81% on 2011.
Central Fife includes Levenmouth, which has the highest rate of child poverty in Scotland outside Glasgow.
The payday loan problem has also been highlighted by Citizens’ Rights and Advice Fife (CARF), which revealed that in the first three months of this financial year its money advice unit dealt with clients who had loans totalling more than £100,000.
StepChange is concerned that serious failings by payday lenders are trapping millions of borrowers with unaffordable debts after it emerged around 2.7 million loans could not be repaid on time last year, and is urging MPs to support a
private member’s bill by Labour’s Paul Blomfield on high-cost credit, which is currently going through Parliament.
The second reading of the Bill, which seeks to end some of the worst practices in the payday lending sector and provide better protection for borrowers struggling with repayments, was adjourned until September following debate earlier this month.
MP Lindsay Roy, who represents the Glenrothes constituency that includes Levenmouth, said he supported the bill.
“We all know the serious problems that borrowing money from these lenders with their eye-watering interest rates can cause,” he said. “The figures from StepChange and CARF give me serious cause for concern.
“Many people, including some of my own constituents, get sucked into taking out a payday loan, which are designed to be repaid quickly, because they think they can settle quickly.
“But if something goes wrong and they can’t, then the interest that has to be repaid escalates dramatically and they can find themselves in serious financial trouble.
“What these payday loan companies are doing is not yet illegal but many of their practices are questionable and legislation is needed to protect the public.”
Norma Philpott, chief executive of CARF, said that lenders encourage borrowers to roll over loans without carrying out affordability checks and that many borrowers are unaware of the true costs of borrowing in this manner.
The use of continuous payment authority (CPA) can often leave people with no control over their finances as payments can be taken at any time by the lender.
She added: “In the first three months of this financial year, our money advice unit dealt with clients who had payday loans totalling over £100,000.
“There are a variety of reasons for people turning to payday loan companies, for example a downturn in household income caused by the recession and/or welfare benefit changes.
“Many of our clients are less likely to have access to mainstream credit and are more vulnerable to financial difficulties as a result of borrowing through pay day loans.”
Norma urged anyone struggling with their payday loan or any other debt to contact CARF’s money advice unit on 0845 1400 094 for advice and assistance.
Mr Roy said: “Let’s not forget that it is often the most vulnerable members of society who turn to payday loan companies for money to tide them over because they are already experiencing money problems.
“Measures such as the Government’s benefit cuts are making an already precarious position immeasurably worse for many people, and with perhaps nowhere else to turn, they are easy prey for payday loan companies.
“That’s why I am giving Paul Blomfield’s Bill my full backing something has to be done to protect people and I sincerely hope that it becomes law.”