OUTRAGE AT 2,000% Interest on LOANS

By Louise Barnett
December 14 2009

GREEDY lenders are exploiting struggling families by offering Christmas loans with crippling annual interest rates of 2,350 per cent.

Families hit by the credit crunch are turning to so-called payday loans because they cannot access extra money from high street banks.

National TV adverts for one loan firm hit screens last week just as Office of Fair Trading research revealed a worrying increase in expensive short-term borrowing. And last night there were calls for the Government to clamp down on the loan firms amid fears that thousands of families could be plunged into spiralling debt.

Liberal Democrat Treasury spokesman Vince Cable said: “At a time when official interest rates are close to zero and inflation is very low or negative it is unbelievable that people are being charged thousands or hundreds of per cent in interest.

“Much of this can be attributed to the withdrawal of credit from struggling households who can no longer use banks and are being driven into these extreme and extortionate forms of credit.

“These findings by the Daily Express underline the need for the Government to match its rhetoric with firm action to regulate these extortionate credit markets.”

Payday loans typically charge interest at an Annual Percentage Rate of between 1,000 and 2,000 per cent. Borrowers usually pay £25 interest for every £100 cash advance which the lender redeems after 30 days via a post-dated cheque for the amount borrowed plus fees and interest.

Internet lender QuickQuid.co.uk is advertising its services this month on national and local TV channels including SkySportsNews, Dave, Channel 5 and MTV. It offers a typical APR of a staggering 2,356 per cent while another major internet lender, PayDayUK, says its typical APR is 1,737 per cent.

A person borrowing £1,000 at 2,356 per cent APR would end up paying back £3,824 over 12 months.

Damon Gibbons, chair of campaign group Debt on our Doorstep, called on the Government to impose a cap on payday loan interest rates.

“This is a market that needs to have a price cap in place. Typically, people become trapped in a dependent relationship one month to the next. They often have to borrow again to pay off the loans they’ve taken out and it becomes a spiral of indebtedness,” he warned. Payday loans were invented in America and launched in the UK just over a decade ago.

QuickQuid’s website advertises same-day cash advances up to £1,500 for existing customers and £400 for new customers in a service it describes as a “hassle-free solution” to household bills or short-term money needs.

Rival service Payday UK’s website offers loans from £80 to £750 payable within 48 hours. John Lamidey, chief executive of trade body the Consumer Finance Association which represents payday loan firms, said: “The APR isn’t the cost of the loan, the APR is the rate. What you have to look at is the cost of the credit – how much is it going to cost you and how much you will pay back.

“Typically, what you are looking at with a payday loan is £200 and one month later you might pay back £250. So you pay back one and a quarter times what you borrow.” He added that internet lenders’ fees tended to be higher than shop-based lenders’ fees because they needed to carry out rigorous expensive credit checks before handing over money.

A spokeswoman for watchdog Consumer Focus warned: “This is an area that needs a light really shining on it.”

And consumer group Which? said: “At the moment it looks as though they are preying on those people who can’t get borrowing elsewhere.”

Source

They all should be shut down. There are other countries that also have allowed these thieves in as well.  This is what you call Hy-way robbery.

They need to be regulated. This type of thing should not now or ever be tolerated. But isn’t Free Trade wonderful?

Compliments of the good old USA.  They know how to gouge customers.

Put them out of business, never use them.

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Published in: on December 17, 2009 at 11:26 pm  Comments Off on OUTRAGE AT 2,000% Interest on LOANS  
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