Shropshire payday loans debts are rocketing

In Telford, the Citizens Advice Bureau reported a 64 per cent jump during the first quarter of this financial year, compared to the same period last year, in the number of people who were using their services to discuss issues about payday loans.

From April to June this year 54 people sought advice from the service, up from 33 during the same months last year. Since the start of July another 40 have visited for advice already and figures only included people who had visited the CAB.

Telford MP David Wright said the figures were "a symptom of the cost of living crisis".

The Shropshire Star obtained the figures as debt charity StepChange reported the number of people they had dealt with across the country soared by more than 13,000 to 43,716 people in the first six months of this year, compared with 30,762 for the same period last year.

Payday loans - such as those offered by companies such as Wonga - are short-term loans designed to tide people over until they get paid but most lenders charge between £25 to £30 in interest per month for each £100 borrowed. Some also charge a money transmission fee and the Money Advise Service warns potential customers taking one could make their financial situation worse if they can't afford to pay it back on time.

Lyn Brayne, service director at Telford CAB, said: "Our figures reflect the national picture.

"We looked at what people were taking their loans out for and what we found was the vast majority of them use it for every day essential living costs, so people who simply do not have enough to live on a day-to-day basis - rent, food bills, petrol to get to work. We are not really seeing people take it out for non-essential living costs."

She said customers needed to be aware of management fees - which companies can charge just for dealing with an enquiry about a loan. She said in one case, a resident had found 11 different companies had taken a total of £4,700 out of their account in admin fees and they had not even taken a loan.

She added: "I am sure as with any form of credit there is a place for quick credit with a few questions asked and some occasions where it may be beneficial to get that quick loan.

"The interest fees, however, rocket up if you do not pay it back and our advice would be to think twice and do not give out bank details over the phone unless you feel you understand and know what you are signing up for and that management fees will be applied. People need to be aware of that.

"There may also be other alternatives, we always suggest people take financial advice before taking out a payday loan."

Mrs Brayne said she feared the problem could get worse. "We have seen a large increase and it does not show any signs of letting up and we think it will get worse as people's household budgets are squeezed further and further," she added.

• Star comment: Payday loans are no quick debt relief