Payday loans surge as those in work watch bills stack up
May 27, 2009
Another month is ending, the recession is biting and thousands of people are flocking to their local loan house or internet vendor for an average of about £230 to tide them over till payday.Online lenders charge as much as about £25 for a £100 cash advance, payable by direct debit from the borrower's bank account 30 days later or on the day their salary hits. That adds up to a hefty annual percentage rate of 1,730 per cent. High street lenders that vet customers in person charge about half that.
Critics say that's still too much, risking pushing vulnerable people into a spiral of debt. Defenders say it is only intended to be a short-term measure, cheaper than running up an unauthorised bank overdraft, and can only be used by borrowers with evidence of a job and a bank account.The Walworth Road, dangling off London's gritty Elephant and Castle roundabout, is fertile ground for H&T Pawnbrokers, the UK's largest lender in exchange for personal property, and The Money Shop, the leading cheque-cashing company with 250 stores nationwide.
The tired high street is home to a cacophony of discount stores, long-neglected branches of major chains and adventurously placed apostrophes ("Better than sale price's!").Many shoppers wear a uniform of costume jewellery and shoulder-high tattoos or are pushing shopping trolleys. Sometimes all three. H&T's window is stacked with abandoned heavy 9ct gold chains and trinkets on sale for several hundred pounds.
Smarter than the nearby gemstore with handmade signs declaring "we buy gold in any condition, best prices paid", H&T feels more like a cross between a high street jeweller and a bank branch inside, with attentive staff manning tills behind glass screens.The Money Shop is snappier still. Instead of jewellery, the windows feature a series of posters of glamorous models looking surprised, contented and flush with cash. "Get Away!", "So Cool!" and "Show Off!", the posters say.
An advert for payday loans features a quizzical fellow with a chisel jaw. "You sure?" it asks. "It's true! You get up to £500 in cash today!" It all feels very respectable.Even so, the mostly young women leaving the stores with bundles of notes in their handbags on Friday morning were unwilling to discuss their visit..
Geoff Holland, chief executive of the association, points to the strict regulatory and registration regime observed by the 850 companies he represents. Many offer payday loans, although they represent a small part of total revenue.
excerpt from http://www.ft.com/cms/s/