Complaints to payday lenders reaches all time high. But what is the solution?
This week, the UK media are reporting on the latest figures released by the Financial Ombudsman Service (FOS), which has revealed that complaints to payday lenders has risen to 130%, a five year high.
Payday lenders, otherwise known as short-term loan providers, are characterised by their astronomical interest rates which make them a high-risk borrowing option for many people. The FOS has revealed that payday loan companies received 40,000 new complaints last year, citing it a “startling” increase on the 17,000 made in the previous year.
Why is this happening?
Many people often turn to payday loans because they feel that there’s no alternative borrowing option available to them. These loans offer a short term solution and an easy way to get access to quick cash, but the resulting repayments can often become a worrisome burden and leave people drowning in debt.
According to The Guardian’s report today, some people have 10-15 payday loans they are struggling to repay, and in some instances the FOS has dealt with customers with more than 100 payday loans at one time. The issue here is that loans are being offered to individuals who then later struggle to afford the repayments, which then causes them to take out further loans.
This is a worrying trend which can cause individuals to become severely stressed and anxious over their finances, causing a real problem for their mental health.
What can businesses do to support employees?
With the average UK debt currently standing at £15,400*, the problem is widespread too. It’s therefore highly likely that a proportion of your workforce is struggling with debt. That’s why it’s essential that businesses are equipped with resources to support the financial wellbeing of their employees.
Through our health and wellbeing platform the zone, we work with a number of fantastic providers who can help employees better manage their finances and get into better spending and saving habits. One of our newest providers is PayPlan.
PayPlan is one of the UK’s leading free debt advice providers, regulated by the Financial Conduct Authority and recommended by the Money Advice Service.
Offering free, confidential, expert debt advice both online and over the phone, PayPlan can support employees to understand the options available for reducing financial worries.
Advisers will help to create a realistic budget and affordable monthly payments to creditors. They provide advice on a range of tailored debt solutions such as Debt Management Plans and Individual Voluntary Arrangements, which can help individuals to become debt-free in just five years.
Commenting on the topic of payday lenders, Jane Clack, Money Advice Expert at PayPlan said:
“Clients can turn to payday lenders looking for an immediate solution to help pay things like bills, often unaware that there can be alternative forms of credit, such as credit unions, and options such as debt advice if people are struggling with money.”
She continues: “Often, our clients will tell us they are too afraid or embarrassed to seek professional help with their debts, opting to have kept their problems to themselves for up to four years prior to seeking support. However, once they have sought help, we hear how they are now able to get a good night’s sleep for the first time in a long time. People also tell us how much more confident they feel in managing their money and believe seeking support has helped to improve their mental and financial wellbeing.”
To find out more visit: www.payplan.com/people-value.
*Trade Union Congress