It is shocking that almost a third of payday loans taken out in Britain at the moment are to cover gas and electricity bills as the cost of living soars.
There has been an explosion in the payday lending market with up to 5 million families planning to borrow money from payday lenders in the next six months.
Many people who take out these loans areworking, but their wages are too low to pay back the astronomical interest rates.
They are not getting into debt to pay for luxuries but to cover basics.
And it’s why, when I hear upbeat, jolly advertisements on radio offering pay day loans, my hackles rise. The inane jingles make a decision to take out a loan akin to buying a candy bar.
But the reality is far from fun. It is people living from hand to mouth, like the Stockport woman I met who talked about a payday loan company clearing out her bank account.
I asked the Financial Ombudsman Service about this and they told me that payday lenders take bank card details and use those to debit clients’ accounts. However, what the payday loan companies don’t tell people, is that if you tell your bank not to comply, this stops it.
Charities, churches, councils and communities all recognise the immense harm done by payday loan abuses. The Office of Fair Trading has referred the entire industry to the Competition Commission because of bad practice and a recent study by the Citizens Advice Bureau reports that lenders break 10 out of 12 of their own good conduct rules.
I am pleased that Ed Miliband has said he would cap the cost of credit and impose a levy on the profits of pay day companies, which could be used to give extra funding to Credit Unions.
We need to build up alternative sources of loans, such as the non–profit making Credit Unions. This will help struggling families escape the suffocating spiral of debt.
It also means that, eventually, some people, who are on their uppers, can start to save a little again for a rainy day.