Payday loans customers seeking debt advice almost double in number

The number of people with payday loans seeking debt advice from the charity StepChange leapt by 82% in 2013 compared with the year before.

The charity said that 66,557 people struggling with high-cost, short-term loans totalling £110m sought help in 2013, against 36,413 with a combined debt of £60m in 2012.

The figures have prompted renewed calls for tougher reform of the payday loan sector when the Financial Conduct Authority (FCA) takes charge of regulating it in April. The FCA has already said it will limit the number of times a loan can be extended, and the government has also tasked it with setting a cap on the amount lenders can charge.

According to StepChange, people seeking advice in 2013 held an average of three payday loans, but around 13,800 had five or more. The average debtwas £1,647, signifcantly more than the average client's monthly income of £1,381.

The charity said it continued to see numerous cases in which debts were inflated through the application of interest and charges. In one case, it helped a man whose original £200 debt grew to £1,851 in just three months.

"The widespread harm and misery caused by payday loans continue unabated," said Mike O'Connor, StepChange's chief executive. "We hope the FCA's proposals will address some of the areas of consumer detriment, but on issues such as affordability checking, rollover and repeat borrowing, there is an urgent need for even more radical reform."

The charity is calling for real-time credit checks, a limit on rollovers so that loans can only be extended once instead of twice as the FCA has announced, and the introduction of a debt-escalation cap that would limit the amount of charges and interest that can be applied to a loan that is in default.

Analysis of StepChange's payday loan clients last year showed that 62% also had overdraft debt, 60% had credit card debts, 45% personal loan debt, 39% catalogue debt and 18% home credit debts.

Payday lenders such as Wonga and the Money Shop offer loans of between £100 and £1,000 arranged over days or weeks, and argue that because borrowing is designed to be short-term the costs involved are no higher than charges applied by mainstream lenders.