The idea of a payday loan - to ensure that a person has enough money in their bank account to cover some bills at the end of the month before they receive their salary - is a useful one.
In an era of stagnating wages and high inflation even the most careful consumer can come a cropper from time to time.
However, the way the market has been run - with unregulated approval schemes and sky-high interest - has turned a short-term fix into a long-term issue for many people. This is why the recent announcement by consumer minister Jo Swinson and economic secretary to the Treasury Sajid Javid about huge changes for the industry must be applauded.
Payday lenders could soon find that they need to adhere to a new code of practice and face new restrictions to the way they advertise.
Ms Swinson said: "The evidence of the scale of unscrupulous behaviour by payday lenders and the impact on consumers is deeply concerning.
"The government is committed to tough action to tackle these problems. The Office of Fair Trading's (OFT) enforcement action will stop payday lenders taking advantage of those in financial difficulty. In April 2014, we are giving responsibility to regulate this industry to the Financial Conduct Authority (FCA), who will have more rigorous powers to weed out rogue lenders."
She explained that the government will work closely with the OFT and the Advertising Standards Authority to ensure that the industry's advertising does not lure consumers into taking out payday loans that may not be right for their circumstances.
The announcement was made after an independent research report from the University of Bristol also found that there was significant evidence of consumer detriment in the high-cost credit markets.
Now, the government has said that it will invoke both short-term and longer-term action to tackle the problems that are leading to high levels of debt in the payday market, including:
• A clampdown on irresponsible practices and in some cases blatant non-compliance by lenders.
• The OFT will be putting 50 lenders on notice, demanding they fix the problems within 12 weeks or face consequences.
• The FCA will have strong new powers to restrict the form and content of advertising and has committed to use these powers promptly when it takes charge next year.
• Independent monitoring of the industry is being considered by the government and all lenders are being urged to improve compliance with lending codes.
• In order to address the growing problem of people taking out multiple loans in one day, the government will ensure the industry improves how it shares and records data.
Jonathan Matthews, a debt advisor with ten years' experience at Debt Legal, said he had seen the problems caused by high-interest loans escalate over the last decade and now they are rampant. He welcomes the government's plans for increased regulation, but laments that for many consumers they have come too late.
Getting out of debt is made all the more difficult when high-interest payday loans start to accumulate, but people should know that they do still have options and they can seek out the aid of a qualified debt advisor before they turn to another lender, Mr Matthews added.
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