High Cost Credit – Press Release
People with money problems seeking help from Citizens Advice Epsom and Ewell are turning to payday loans, credit cards and hire purchase despite the cap on payday loans introduced in January 2015.
The cap on interest rates and fees introduced by the Financial Conduct Authority has led to a 54% decrease in clients seeking our help with payday loans. However, people are accessing other forms of high cost credit which compound their debt problems.
Citizens Advice Epsom and Ewell’s local research shows that in our Borough one in ten clients with money problems uses high cost credit. Of those using high cost cred-it, one in ten has used more than one type of high cost credit, and more than half also has a credit card. This is just the tip of the iceberg with 522 local people last year seeking advice and support on 1,567 debt issues – 19% of all issues we see here.
Our local research also indicates that the least able to afford expensive forms of credit are the most likely to feel they have to resort to them. The profile of those seeking help for issues with expensive credit are:
- 70% are female (compared to 57% of our client profile)
- 29% are single with dependent children (compared to 16% of our client profile)
- 51% are under 40 years old (compared to 36% of our client profile)
- and 58% are social housing tenants
People borrowing high cost credit tell us that “it was the cheapest and easiest to borrow at the time”, but they also report that they find it hard to repay and would not use that form of credit again. It was also common that they were not aware of how much it would cost to repay. This raises questions about whether there are adequate checks made that people can afford to repay loans.
In one case, a client sought advice for problems with expensive fees and unclear charges for an individual voluntary agreement, which he had entered into to clear debts but ended up costing 50% more on top of the original debt.
Liz Dobson, Chief Executive Officer of Citizens Advice Epsom and Ewell said:
“We know that people will find that they need to borrow money at times, but we urge people to understand what the repayment cost will be and to choose the least expensive form of credit available to them. If your finances are getting on top of you and you’re struggling to pay your debts it’s crucial you seek support right away. Here in Epsom & Ewell we have skilled and accredited advisers who can help you work out what you can afford to repay and negotiate with creditors about how you will pay them. Our service is free and we are open 5 days a week, by phone or drop-in.“
Citizens Advice nationally is calling on the FCA to ensure that lenders of all forms of consumer credit behave responsibly towards their customers, extending the total cost cap to all high cost credit markets.
You can download our one page summary here: High Cost Credit Findings May-June 2017