Breadline Britain: New figures show the extent of UK payday lending addiction

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Wonga may have kicked the bucket, but Britain’s unhealthy dependence on payday loans is still very much present – and it is getting worse.

New data, seen exclusively by This is Money, has revealed the full extent of the country’s dependence on payday loans, with UK borrowers racking up astronomically expensive debt topping £ 1 billion last year.

Total payday loans reached a staggering £ 1.2 billion in 2018, according to figures from the Financial Conduct Authority.

The official figures have come to light following a Freedom of Information Act request to the financial watchdog by flexible salary app Wagestream.

They place Birmingham as the payday loan capital of the UK, with £ 37million in payday loans taken out last year.

In the red: London, South East and North West took on the most payday debt last year

Residents of the West Midlands city also took out the most payday loans by volume – a whopping 146,176 throughout the year – as their personal finances were under pressure.

Ranked by the total value of payday loans borrowed in 2018, Birmingham was followed by Manchester at £ 28.6million and Sheffield at £ 23.8million.

More and more people are turning to payday loans

After millions turned to payday loan providers in the wake of the financial crisis, the watchdog capped outrageous interest rates they were charged in 2015.

Before that, there were examples of APRs reaching 5,853%, meaning that a £ 100 loan would accumulate £ 672 in interest in just six months. If left for a year, interest on the £ 100 loan would rise to £ 5,853.

Britain’s Top 10 Payroll Poverty Hotspots
Place Number of loans Average loan Fees and interest paid Loan per capita Total value of loans
Birmingham 146 176 £ 254.00 £ 24,133,812 £ 19.50 £ 37,128,942
Manchester 124,147 £ 230.38 £ 18,590,972 £ 24.50 £ 28,601,495
Sheffield 100 853 £ 235.67 £ 15,449,214 £ 17.50 £ 23,768,022
Glasgow 99,485 £ 237.64 £ 15,367,063 £ 19.97 £ 23,641,636
Newcastle 100,595 £ 233.15 £ 15,245,059 £ 20.17 £ 23,453,937
Nottingham 92 655 £ 241.53 £ 14,546,270 £ 19.23 £ 22,378,878
Liverpool 89,220 £ 238.99 £ 13,859,862 £ 24.89 £ 21,322,865
Peterborough 74,194 £ 247.79 £ 11,949,755 £ 20.65 £ 18,384,239
Cardiff 74,370 £ 236.54 £ 11,434,669 £ 17.50 £ 17,591,799
Leicester 68,060 £ 253.37 £ 11,208,939 £ 17.50 £ 17,244,521
Source: Financial Conduct Authority

Now providers cannot charge payday loan borrowers more than the original loan taken, and the cost per day cannot exceed 0.8%.

While this has helped reduce the worst damage from these loans, the number of people in financial difficulty because of these facilities is on the rise, according to the Stepchange charity.

In 2017, 16.8% of the charity’s new clients had high-cost short-term debt, such as a payday loan, but that figure rose to 18.3% for the first half of 2018.

A spokesperson for Stepchange said: “In 2018, we saw a small but worrying increase in the proportion of new customers with high-cost payday or other short-term credit as they go. asked for help.

“This was especially true for our younger clients: among those under 25, a quarter of women and a third of men had this type of loan.

“This type of borrowing is often used to try to keep pace when managing your finances has already become difficult.”

The Financial Conduct Authority said more than 5.4 million of these loans were made in the first half of 2018. Loan volumes in general have increased since 2013 and, on average, borrowers are repaying 1.65 times the amount. that they borrow.

Gillian Guy, Managing Director of Citizens Advice, said: “It is even more essential that affordability controls for payday loans are strengthened as loans increase.

“We are seeing evidence that companies are handing over unaffordable amounts of money to people, many of whom are vulnerable or already have multiple debts.

“We want the FCA to act. The rules should tell lenders what these checks should include – most importantly, proof of income and usual expenses.

The late Wonga notoriously charged interest rates above 5,000 percent

The late Wonga notoriously charged interest rates above 5,000 percent

Breadline Great Britain

When weighted by population density, Croydon topped the list for those most reliant on payday loans.

The Borough of London borrowed £ 29.15 for every man, woman and child last year, for a total of £ 11.8million in payday loans in 12 months. It was followed by Romford at £ 29.04 per person and Dartford at £ 26.26 per person.

Due to the higher cost of living, locations in and around London topped the list of areas with the highest average loan amounts.

The largest loans on average were guaranteed in Ilford, east London, where the average payday loan was £ 301.73, against Harrow in second place at £ 285.29.

A surprise entry is the Shetland capital of Lerwick in third place, with an average payday loan amount of £ 281.56. This can be explained by the estimated 40 percent of Shetland households that live in fuel poverty.

Peter Briffett, Managing Director of Wagestream, said: “Payday loans are exploitation, extremely high cost and just plain bogus, so it is frankly mind-boggling that these lenders can still prey on UK workers.

“However, in the majority of cases, the financial stress caused by the monthly pay cycle means people are turning to payday lenders not out of choice but out of necessity.”

>> Click here to download the full list as a spreadsheet

Where to get help

If you’re struggling with debt, it might be tempting to bury your head in the sand, but there is free help and advice that can help.

This is Money has put together a 10-step plan to help you get out of debt, which you can read in full here.

You can also get free help from charities and counseling websites, which offer guides and fact sheets or allow you to speak to an advisor who can explain your options to you.

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