Payday loan debt problems are soaring

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The number of people struggling to cope with payday loan debts has risen by more than 13,000 in the past year, figures show.

Debt charity StepChange said they dealt with 43,716 people in the first six months of this year, compared with 30,762 for the same period last year. The figures, showing that the charity has handled more than £72m in debts in the first half of 2014, highlight the need for further action to ensure better protection for vulnerable people who might consider taking a loan, it said.

In July the Financial Conduct Authority announced proposals to introduce a cap on the fees and interest charged by payday lending firms in a bid to protect borrowers from escalating debts.

The proposals, which include default fees capped at £15 and a limit of 0.8 per cent per day on interest on unpaid balances, should mean those who cannot repay on time will never have to pay back more in charges than the amount borrowed.

StepChange is calling for a tougher total cost cap than 100 per cent of the value of the loan, especially in relation to higher value loans, as well as an obligation for lenders to have access to a database showing a borrower’s financial situation. Chief executive Mike O’Connor said more can be done to protect those facing serious money worries.