In the UK, there has been a whopping increase in the number of payday loan takers within a short span of years. After a survey, it was found out that, there has been a 241% increase in borrowers of pay day loans UK within four years. Whereas in 2006, the number of people taking payday loans no credit check was 1.2 million, it had increased to a 4.1 million in 2010. That makes it a 130% increase.
This could cause for the fact that, there are neither any rules against the rolling of loans nor is there any usury limit in the UK government law. This has led to the huge growth of such companies rapidly and most of them charge unfair fees and interests as well. There are attractive adverts and certain companies are seen to offer an APR as high as 1355% including compounding, which would otherwise be 300% without compounding. While some lenders offer a 2,225% annual rate, companies charge as much as 25% so that there may be an advance repayable at the end of the month. This explains the cause for keeping such high rates.
Regarding the huge increase in the demand of such loans, a “Review of high-cost credit” was published by the OFT in June 2010. According to the report, it was said that, in order to handle the high-cost credit markets, existing in the wider social, economic and financial fields, a more effective approaches were needed and only then the amendments could be made to this industry, for its fair working.