The United Kingdom has been fierce in reining in the payday loan industry. Whether it is making borrowers’ rights more prevalent or installing new regulations for lenders, the overall payday loan industry in Great Britain has been scrutinized and their reach has diminished in the last two years.
But it seems that payday lenders have a new target in their line of vision: homeless youth.
According to a new report from a non-profit organization, payday loan companies are trying to get homeless teenagers to take out online loans, and then they hound the borrowers for repayment.
The youth homelessness charity Centrepoint warns that unscrupulous payday loans are looking to nab homeless youth as their newest clients. The problem with this, the charity adds, is the fact that some of the lender’s ar targeting those with learning disabilities, and this is generating much publicity.
Over the weekend, The Independent published a report about how one homeless 19-year-old, who had the mind of a 10-year-old and resided in a hostel, was receiving text messages from a payday loan firm. Reportedly, they had demanded that he pay them $250 after lending the teenager about $62.
Centrepoint staff are looking to stop the trend before it becomes out of hand. Freda Dyson, manager of the Centrepoint location in Bradford, said that the staff are confronting the lenders and point to them the numerous trading standards and lending practices that these payday loan businesses must abide by.
“A young person might get one of these loans. Then their friends would find out and ask them to get a loan on their behalf, promising to pay them back when they got their next benefit payment. So someone might get a loan for a friend. Moreover, another friend, and another…” she said.
“They could end up with five debts allocated to them. Some companies were throwing money at people. It’s a money making scheme for them, isn’t it? It’s just greed, capitalizing on the misery of others.”
Many of the homeless kids may think that it’s just $100, but it could morph into something a lot bigger.
Whether or not this will succeed remains to be seen, but many are upset by the latest developments. The Financial Conduct Authority (FCA) has been cracking down on the payday advance loan industry since 2013 and has tightened up the lending regulations. With this story capturing headlines, the FCA may be demanded to step in and do much more to protect the most vulnerable in British society.
Today, the average payday loan customer is between the ages of 25 and 39 and earns about $30,000 a year. It is estimated that 90 percent of the cases include debt that is paid off without extra fees or charges that have been added to the pile by the payday lender. However, Dyson is irked that these lenders are still looking to appeal to the homeless youth who do not have money, jobs or a home.
Because of this latest trend, Dyson is calling for a national helpline that veers homeless youth away from payday loans. The call has just been started, but if it gains enough traction then it could be installed.
“The young people should not have taken the loans out in the first place, but if you have basically got nothing and you can access a loan straightaway, in the next two hours, what are you going to do? You are going to think, ‘This will sort out my problems, and I will be able to deal with it’. However, unfortunately it does not work like that,” she stated.
With the FCA’s latest rules in place, the number of approved payday loan applications have dropped by 70 percent.