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The Size Of The Payday Loan Industry In The UK
The recession has caused a huge increase in demand for payday loans in the UK as more lower income consumers being financially squeezed, the reduced availability of other unsecured loans, and consumers being somewhat reluctant to take out any long-term loans in order to finance short-term cash needs.
Based on an estimated average loan of £294, IRN Research estimates that 1.2 million adults in the UK took out payday loans during 2009. Their research also estimates that there were 4.1 million loans resulting in a total lending of £1.2 billion.
Over the course of 2009, the payday loan industry generated a gross income of £242 million – the equivalent to around 20% of the total amount lent.
In the last few years, the UK market for payday loans has experienced rapid growth with many new online loan providers, in particular, entering the payday market.
This increased growth in the online payday loan sector has resulted in the average rate of charges per £100 of loan rising from around 15% in 2006 to 20% in 2009. Online providers work with high costs and tend to charge more on average when compared to High Street providers.
Research by the Office for Fair Trading (OFT) suggests the demand for payday loans could rise steeply in the future. Using the figures from this research, IRN Research predicts the number of borrowers could potentially rise by 40-45 per cent in the coming years.
Who Are The Major Players In The Payday Loan Industry?
There are 7 companies that stand out as the largest operators of payday lending in the UK.
Mem Consumer Finance
Trading as:
- Month End Pay
- Payday Now
- PayDay UK
- Payday Store
- Quicksilver
- Payday Loans
Dollar Financial Corp (including The Money Shop and online provider Express Finance (Bromley) Ltd)
CashEuronet UK LLC (trading as QuickQuid)
Albemarle & Bond Holdings PLC (Including Herbert Brown & Son)
National Cash Advances
Cheque Centres
H&T Pawnbrokers
Dollar Financial Corp is the market leader in the UK supplying around 25% of all the payday loans originated in 2009. As well as being the largest High Street provider, it is also now operating online.
Mem Consumer Finance is the second largest player and the largest internet provider. With Cash Centres (High Street provider) and Cash Euronet (online provider) making up the number two players in their respective markets. Behind these two companies are the largest pawnbrokers in the UK, Albemarle & Bond Holdings PLC and H & T Pawnbrokers.
5 Loans Per Household Limit
By limiting the number of loans or rollovers to a maximum of 5 per customer, payday lending should still be available for consumers to use them, but not to the stage where they are becoming an unsustainable debt.
The aim of putting a cap on the number of loans or rollovers allowed would be to prevent consumers getting themselves into a debt spiral where they reach a point where they are borrowing in order to service the loan which is now increasing rather than relieving their burden of indebtedness.
Click here to learn more about the benefits of introducing a set limit for payday loan applications and rollover borrowing.
NO Specific Payday Regulation
Right now there is no specific payday regulation in the UK, payday lending is currently regulated by general consumer credit legislation that is just not adequate.
Click here to learn more about the current lack of payday specific regulation in the UK.
Banning Payday Lending In UK
We feel that further work needs to be carried out by the Office of Fair Trading to investigate the impact of banning payday loans within the context of the UK market.
To date, research in this area has been largely focused on the experiences of other countries and is not specific to the UK payday lending market.
Currently, it is a concern that imposing a complete ban on payday loans in the UK would increase illegal lending, but if a greater range of lower cost alternatives were to be made available to low income customers through areas such as banks and social lenders, this risk would be significantly diminished!
UK Debt Counselling Services
Below you will find links to a number of non-proft debt counselling services in the UK.
These organisations will provide you with the advice and help you need, from someone paid to help you, not to make money out of you.
- Consumer Credit Counselling Service
- National Debtline
- Citizens Advice Bureau
- Christians Against Poverty