According to Lucinda Penn, a licensed insolvency practitioner with chartered accountants Francis Clark LLP, the current economic climate has supported the evolution of a new credit culture and the arrival of huge numbers of companies offering loans at extortionate rates of interest to those members of the public who are in a financial downward spiral.
Lucinda, who is based in Francis Clark’s Truro office following the firm’s merger with Winter Rule, said: “With the increasing popularity of the internet, it’s no longer necessary to go to your bank to borrow money.
“Increasingly popular are payday loans - borrowing a relatively small sum of money, which is repayable in full on your next payday, with representative APR sometimes as high as 2,500%.
“More likely than not, taking out a payday loan is just serving to delay an already deep rooted financial problem that ought to be resolved rather than put off.
“In most cases, if you have insufficient funds with which to last to the end of this month, and you borrow money from next month’s budget, a further and more significant problem is bound to be experienced next month.
“With Christmas now upon us, I anticipate vast numbers of people turning to these easy access high interest loans, in the hope of putting off the inevitable”.
Citizens Advice Bureau warned the number of people running in to debt through payday loans has quadrupled in two years, and this is set to increase. Whilst bankruptcy rates countrywide appear to be reducing, Cornwall is still seeing substantial numbers of people struggling to meet their ongoing commitments.
Lucinda continued: “My belief is that bankruptcy rates will sharply rise in the New Year, with such issues as payday loans repayments, Christmas credit card bills, bank charges and the like. This problem will also be compounded for those running a business when the January self assessment tax deadline passes, especially with the slowdown in HMRC agreement to time to pay arrangements.
“The message remains the same; people in difficult financial positions should take action now to protect themselves and their families from being caught in the downward debt spiral.”
Ends
Download full press release