High street payday loans

Payday loan firms are closing down hundreds of shops after being banned from charging rip-off interest rates.

The Money Shop, Britain’s second biggest lender after Wonga, plans to shut 240 branches by the end of next month, taking its total number below 300.

The number of shops run by major payday lenders has plummeted from 1, 400 at their 2013 peak to 500 with the latest closures.

The Consumer Finance Association, which compiled the figures, claimed it would force some people to turn to illegal loan sharks.

But Peter Tutton, of debt advice charity StepChange, said: “We do not believe that people will turn to illegal lending as a result of a shrunken payday loan market.”

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Labour’s consumer affairs spokesman Stella Creasy, who has campaigned against payday loans, said: “The decline in payday shops has to be welcomed because it reflects the fact that the new regulations are working.”

The cuts come after the Financial Conduct Authority brought in rules that limit interest on short-term loans to 0.8 per cent of the original amount borrowed per day.

Lenders had been under fire for charging annual rates of as much as 6, 000 per cent.

PA

Interesting facts

• Payday loans in the United Kingdom are a rapidly growing industry, with four times as many people using such loans in 2009 compared to 2006—in 2009 1.2 million people took out 4.1 million loans, with total lending amounting to £1.2 billion. The average loan size is around £300, and two-thirds of borrowers have annual incomes below £25,000...
• LMCU (originally known as SCECU - Southwark Council Employees Credit Union) is a community-based financial cooperative that exists for the benefit of working and non working people of Southwark and Lambeth boroughs. They offer savings accounts, current accounts, loans and insurance to members of the community who find themselves financially...