Renfrewshire Council blocks 300 payday loan sites
Renfrewshire Council has become the latest local authority to block access to payday loan websites from computers in its libraries, offices and community facilities.
Some 300 sites have been blocked as part of the council’s strategy to help local people manage their money and avoid getting into debt.
In addition to banning access to payday loans, Renfrewshire Council has created a 45-strong team to provide local people with advice and assistance about the changes to their benefits and money and debt issues.
Councillor Michael Holmes, Depute Leader of Renfrewshire Council, said, “The people who use payday loans are often on low incomes. They don’t have savings to fall back on and they struggle to get affordable credit through more traditional ways of borrowing. Payday lenders charge significantly more interest than banks and credit unions; sucking money out of low-income communities.
“The idea behind payday loans is that people borrow a small amount of money and pay it back quickly. But if these loans aren’t repaid within a month, or if the borrower defaults on their payments, interest charges and penalties can cause the debt to spiral out of control.
“One leading payday lender charges 4,214% interest a year. In 12 months this would turn a £30 payday loan into a £1,264 financial millstone.
“The changes to the benefit system are going to take £22million out of the pockets of the poorest people in Renfrewshire. Many of them will be driven to payday lenders to try and make ends meet.
“The council is determined to use its voice and influence to guide people towards affordable credit such as credit unions and protect them from falling into a high-interest debt trap.”
In addition to high interest charges there can be other pitfalls with payday loans.
Councillor Holmes said, “Payday lenders often set up Continuous Payment Authorities when people take out a loan. This gives them the right to take money out of people’s bank accounts even if it puts them into the red. This can lead to overdraft charges which make the situation even worse. It also means the payday lender can help themselves before the person has paid their essential bills such as rent or power bills.
“Payday loans may be easy to understand. They may be simple to use but with an annual interest rate of an eye-watering 4,214%, they can be very, very difficult to repay.”
Peter Tutton, Consumer Policy Officer at Citizens Advice, said, “The problems we see are where short-term credit becomes long-term and people get into a cycle of debt. Many people using these types of loan can’t afford them in the first place, can’t pay them back and end up by taking out multiple loans.”
The Government is currently considering the Office of Fair Trading’s (OFT) review of payday loans and the OFT has opened formal investigations into several lenders.