Housing Solicitors

A single mum of two has hit out at payday loan companies after she managed to rack up debts totalling £3,000, despite being on benefits.

Katie McGill, 28, of Devizes in Wiltshire told The Mirror that she and her former partner were in a stable relationship and used to have a reasonable income enabling them to settle any loans on pay day.

However, she found herself on benefits when the relationship ended and as Christmas approached took out a total of eight loans to cover the cost of buying presents for her two children, as well as Christmas food.

Ms McGill says none of the lenders looked into her financial circumstances and one leading loan provider – Wonga – continues to allow her to borrow money. Wonga responded to the story saying existing loans have to be paid off before borrowers can take out another loan, however.

Ms McGill receives just £140 net in benefits every fortnight and will have to pay back the money she borrowed from that. The loans were for amounts between £80 and £380 and repayments start on 2 January.

“When I start paying back the loans I won’t be able to pay the bills or buy food and drink and basic necessities. Then I’ll take out more loans and it will be one big, messy circle,” she said.

Payday loan companies have been criticised recently for the high amounts of interest charged on relatively small loans.

Some bank account holders have even found amounts have been taken from their accounts by payday loan companies, when they have not taken out a loan – victims find that a borrower has taken out the loan and has then used their account details for the repayments. The loan provider has not bothered to verify the details as correct before collecting payments.

Labour MP Graham Morris has suggested that the government has not taken action against loan companies because many are “major providers to the Tory party”.

“Questions need to be asked as to why the government is unwilling to take effective action,” said Mr Morris. “And there is a cast iron case for stronger regulation of these high cost payday lenders.

”It is an appalling situation that is storing up further misery for low income families in the New Year,” he added.

Labour leader Ed Miliband has already pledged to introduce a cap on charges for payday loans if Labour wins the General Election in 2015.

However, the Banking Reform Bill is currently being read in Parliament and could be amended to include reforms to charges such as arrangement costs, penalty fees and interest rates for payday loans.

In November, the Financial Conduct Authority (FCA) announced it would set a cap on the cost of payday loans. Australia has already set a limit on fees pay day loan companies charge and the UK Treasury has said there is a case for a similar cap being set in Britain to protect consumers.

Duncan Lewis Housing Solicitors

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For expert legal advice on debt, housing benefits and local authority housing contact Duncan Lewis Housing solicitors on 020 7923 4020.