Sharks out this Christmas


Beware the payday loan sharks. That’s the stark warning this Yuletide from south west accountancy firm Francis Clark.

Lucinda Penn

According to licensed insolvency practitioner Lucinda Penn, who is based at Francis Clark’s Truro office, the idea of saving money for big ticket purchases is becoming a distant memory for all but a few people, particularly if they are aged between 25 and 44.

She says the current economic climate has supported the evolution of a new credit culture and the arrival of huge numbers of companies offering loans at extortionate rates of interest.

Penn said: “With the increasing popularity of the internet, it’s no longer necessary to go to your bank to borrow money.

“Increasingly popular are payday loans – borrowing a relatively small sum of money, which is repayable in full on your next payday, with representative APR sometimes as high as 2,500%.”

But she warned payday loans are rarely the answer.

“More likely than not,” she added, “taking out a payday loan is just serving to delay an already deep rooted financial problem that ought to be resolved rather than put off.

“In most cases, if you have insufficient funds with which to last to the end of this month, and you borrow money from next month’s budget, a further and more significant problem is bound to be experienced next month.

“With Christmas now upon us, I anticipate vast numbers of people turning to these easy access high interest loans, in the hope of putting off the inevitable.”

Citizens Advice Bureau says the number of people running in to debt through payday loans has quadrupled in two years, and this is set to increase. And as we revealed yesterday, Cornwall has the highest rates of bankruptcy in the country.

Penn continued: “My belief is that bankruptcy rates will sharply rise in the New Year, with such issues as payday loans repayments, Christmas credit card bills, bank charges and the like. This problem will also be compounded for those running a business when the January self assessment tax deadline passes, especially with the slowdown in HMRC agreement to time to pay arrangements.”