When ends won't meet, the sharks begin to circle

A recent opinion poll by ComRes showed 2 in 5 adults (42%) often/sometimes struggle to make it to payday and 50% of adults are worried about their level of personal debt. Of those adults who have taken out a payday loan, 50% have used it to buy food and 35% have used it pay for a gas or electricity bill.

It speaks volumes that there is an increasing prevalence of pay day and other lenders across our region. Like most business ventures that spring up, they are responding to a 'consumer need'; growing numbers of people are struggling to get to pay day because their wages are going down while the cost of living is going up.

The Citizens Advice Bureau are facing huge problems finding enough funding to meet the increasing demand of providing the support and welfare advice people need since the benefits system was changed fundamentally. People receiving benefits, even those in work, are dealing with punitive cuts to their incomes. Consequently, the risk of debt, through pay day lenders or illegal loan sharks is high on the CAB's agenda.

While organisations like the CAB struggle to deal with the demand and only have limited resources, loan sharks operate on an immediate, grass roots level. It's often a guy on a street corner who makes it his business to know everyone in the community, to know when people get pay or benefits, their circumstances and when they're likely to be short. A quick deal with them and an envelope of cash appears. They operate outside the law, anonymously, charging exorbitant interest rates and ensuring collection with the threat of violence.

Hand-in-hand with the rise of illegal loans is the growth of pay-day lending firms - either online or through highstreet shops. This kind of lending is legal and regulated but the two are very much connected. People who don't have the money coming in that they need get loans from a lending shop, paying back more each time and sinking deeper into a spiral of debt and in desperation turn to loan sharks.

Payday loan companies have long been controversial, with the Office of Fair Trading criticising the industry over their 'aggressive' debt collection practices. The problem might be mitigated somewhat if legal pay-day lenders stuck to the policies they are supposed to, such as making more checks on whether vulnerable people can pay loans back and being much clearer about the terms of their loans.

Living wages alongside better and more jobs would undoubtedly help to stem the tide of people getting into serious debt, but this won't happen overnight. In the interim, it is vital that people are protected where possible and at the very least financially educated so they understand what they are getting into, and that there are viable alternatives to 2000+% interest rates. A good starting place is FINCAN http://www.fincan.co.uk/

Beth Farhat, Regional Secretary Northern TUC.