Time for the Government to act on pay-day loan market

YOU only need to walk down East Street in Bedminster, or watch the adverts on daytime TV, to know that the pay-day loan market is booming. Some of these companies are paying huge sums to sponsor football clubs and television programmes, as they try to seek ever more profits from vulnerable people.

Unfortunately, as the economy continues to stutter, and with the Government's welfare reforms starting to bite, many more people are likely to seek short-term finance which could become a long-term burden.

Pay day lenders charge eye-wateringly high rates of interest – with APRs of over 1,000 per cent common-place.

While some people undoubtedly use these lenders in response to an especially large bill, there is growing evidence that many borrowers are using pay day loans for everyday essentials like groceries. It's easy to say how using this sort of credit regularly forces people into a spiral of debt which is almost impossible to escape.

While they argue that their products are intended for short-term borrowing only, the reality is very different, with around a third of text loans and pay day loan taken out in order to pay back pay-day loans, and many companies allowing debts to be 'rolled over' into the following months.

With changes to tax credits and housing benefit, many people in low paid employment are going to face tough times financially. Unfortunately, some of them will take out pay-day loans.

It is time for the Government to act. So far, all we have seen are voluntary codes of practice from the pay-day lenders. Self regulation is not enough. It's time for the Government to consider capping interest-rates so that consumers can be protected against sky-high charges.

I am especially concerned that Bristolians may feel forced into these sort of loans as we approach Christmas. It's always an especially expensive time of year, particularly for people who have children to buy for. We can expect to see plenty more adverts for companies who are little more than legalised loan sharks.

Fortunately, there is an alternative. Credit Union offers ethical banking, and loans with much more reasonable interest rates.

They will consider all applications, including from people who may have been turned down on the high street. The Credit Union is run as a co-operative and owned by its members – ordinary Bristolians. That means that the Credit Union can concentrate on providing services to members.

As well as loans, the Credit Union offers a range of banking and savings services, including a fully protected Christmas savings account, where you can save all year and withdraw the money in November.