On 2nd October 2014 the BBC reported that the payday loan company Wonga had written off £220m in loans for 330,000 customers after putting in place new affordability checks.
Debt specialist, Jacqui Scott of Huddersfield-based Ridley & Hall Solicitors is deeply concerned about the easy availability of payday loans. Applying for loans can by done via text, email or over the telephone with no investigations into personal financial circumstances. Jacqui’s client, Malcolm Squire, is prepared to talk publicly about his experiences.
Jacqui comments. “Mr Squire’s experience with Wonga and companies like them was that it was like having a carrot dangled in front of him.”
Mr Squire, from Mirfield found that his troubles began when he was made redundant. He quickly found that his debt problems started spiralling out of control:
“I was amazed at how easy it was to get loans – a 30-day loan would be offered straight away often by a phone call or text. Money would be in my bank account within 15 minutes.”
No affordability checks were made and in the end Mr Squires had over 11 payday loans.
Jacqui Scott says, “My client borrowed £270 from one lender. He repaid £127 but still owes £385 – he was always in debt because of the interest that was being added on a daily basis.”
When things started to go wrong, he was pursued relentlessly; “I would receive telephone calls on a daily basis demanding money. I never realised how quickly things would get out of control. I started with one pay day loan and when it came time to pay it back I needed to take out an additional loan to cover what I had borrowed but also more because of the interest. In one year whilst I was working I paid £13,000 in interest alone. This just went on and on until it came to the point that I had to pawn items. I took my camera to be pawned and received £25 for it. For each month that it was in the pawn shop I had to pay £15 interest and I needed to pay £40 to get it back.”
Mr Squire may have his debts written off but the stress over the last two years has taken its toll. He is grateful to Jacqui Scott for her help:
“I don’t know what I would have done if it hadn’t been for Jacqui helping me to sort all this out. At times I was frightened by the phone calls and letters that I was receiving but she reassured me of my rights all the time and how to handle things.”
Jacqui has this warning for anyone considering taking out a payday loan, “The cost of a payday loan is significantly higher than other forms of borrowing. Typically payday loans have APRs of between 390% and 900% and should only therefore be used with caution and not as a general form of credit.
“Do not borrow more than you will be able to repay and do not rely on payday loans for long term or large scale borrowing.”