Protected Trust Deed Figures and Payday Loans

The clamour surrounding payday lenders continues to gather pace. Politicians, campaigners, regulators, the media, and debt advisers, are all warning of the dangers posed. Protected trust deed figures are highly likely to increase if the volume of payday lending continues on its current trajectory.

What is it about this type of lending that makes it especially likely that users will eventually find themselves having to resort to personal insolvency measures such as a protected trust deed? There are many reasons why this is the case.

Marketing of payday loans is becoming especially targeted on certain groups, with young female customers seemingly especially prized. One website suggests they might be useful if you’re, “attending a wedding and you need a new dress”. According to the Daily Mail this lender charges an APR of 1737%. Enormously expensive borrowing, for non-essential items, poses a huge threat of debt build-up based on unaffordable aspiration. Aspirational debt is known to be a reason why increasing numbers of young women are entering a protected trust deed or other debt measures available around the UK.

R3, which represents insolvency practitioners that take protected trust deed appointments, estimates that half a million women will obtain a payday loan in the next six months.

Payday lenders also persist in allowing clients to “rollover” payday loans. This basically involves not paying back the full amount when it is due, thereby adding extra charges and interest. Spiralling interest and costs is a common feature of personal debt in the run-up to consideration of a protected trust deed. Trade association the FLA has announced that their members have agreed to rollover a loan a maximum of three times, but as only Wonga is a member this is likely to make little difference.

It’s not just rollover and targeted marketing exacerbating the likelihood that payday loan users may end up needing a protected trust deed. The mind-numbingly extortionate interest rates are central to the problem. According to the media this week we can find Cash Lady at 1737%, Wonga at 4214%, and Peachy at 16000%. Protected trust deed advisers are used to a rapid acceleration in debt levels in the period before their clients contact them, but these types of APR interest rates are taking things to a new level.

One question on the minds of many protected trust deed providers, who deal with the aftermath of this usurious lending, is whether this is an industry that will eventually eat itself. Poor reporting to credit reference agencies means most payday lenders would be unaware whether they were lending to someone who already had five payday loans (that they could not afford to repay). Who is likely to take out the most new paydays loans? It may be people who already have so many payday loans that full repayment will never be an option. Are the seeds of its own destruction being sown in the same way that bank profiteering wound up with the credit crunch?

If payday loans have become a problem for you it might help you to visit our protected trust deed forum. Trust-Deed.co.uk experts, who themselves work with clients setting up a protected trust deed or other debt options every day, are available to answer any questions that you might have. The forum may help you to decide whether it is time to break a payday loan vicious circle with one of the many debt resolution options that exist. A protected trust deed is just one possibility, other less serious measures may turn out to be more suitable.

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