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Welsh Families Receiving The Gift Of Debt This Christmas

by Jim ONeil on December 27, 2011

in Personal Finance News

An increasing number of Welsh families are using payday loans to fund Christmas spending this year, say experts. Debt charities and politicians are asking the Welsh government to respond before the situation gets worse.

They are calling for an end to pushy marketing campaigns used by some payday lenders. These aggressive tactics make expensive payday lending too attractive to financially-strapped consumers, especially during the holiday season.

Residents of Wales are taking out Christmas payday loans with annual interest rates up to 5,000 percent. During 2011, payday loan complaints have more than doubled within the UK.

Experts are worried that more UK residents are using payday funds to pay for holiday gifts. There were 1.2 million payday loan customers in 2009 and some experts believe this figure is now as high as four million.

The recent report from insolvency firm R3 worries financial experts in Wales. Within the next six months, 3.5 million UK residents believe they will need these no credit check loans to make financial ends meet.

Forty-seven percent of adults in Wales already have one or more credit agreements featuring an outstanding balance, with ten percent of them having four or more credit commitments.

A substantial 21 percent use credit to cover everyday expenses. The last thing these people need is a payday loan.

Many payday lending customers take multiple loans to consolidate and repay debt. R3 reported that one-third of existing payday loan customers took a second loan to pay off existing debt.

Many payday lenders do nothing to help consumers deal with their debt issues. A spokesperson for the Consumer Credit Counseling Service referred to payday financing as “the loan from hell.”

Christmas time is a financially difficult time for many consumers, leading them to accumulate debt.

Consumer Focus Wales is requesting safeguards to prevent payday loan customers from falling into debt traps. It supports a legislative cap of five payday loans or rollovers per year and wants banks to offer more short-term loans to customers in need.

Some legislators believe that the inability to access other forms of credit is driving many people to payday lenders. Since these firms can charge any rate of interest they wish, payday lending interest rates are staggering.

Credit unions are being hailed as a savior in this situation of “financial misery.” They offer communities and individuals alternative forms of borrowing considered much safer.

Legislators say that the high interest credit sector must be regulated, if only for ethical reasons. It is too easy for consumers to amass debt through payday borrowing.

Many do not even realize they are building debt because they make their regular weekly payments.

Consumers like Steve Perry, who borrowed money 64 times from 12 lenders within just 18 months and now owes £19,000, accept their role in the situation.

They recognize that their poor choices led them into a borrowing spiral. However, they feel that payday lenders have not taken responsibility for their part in the mess, which includes adding interest daily and making repayments difficult.

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