The Royal Society for Public Health has found high cost credit - like payday and doorstep loans - is having a 'destructive' effect on the nation's mental health
PAYDAY loans and other forms of high cost credit are driving the UK's poorest people to depression, a new report has claimed.
More than 500 borrowers were asked about the impact different forms of credit had on them to compile the findings.
Earlier this week, The Sun launched its own Stop The Credit Rip-Off campaign to help the millions of families falling prey to legal loan sharks.
The report from health education charity the Royal Society for Public Health (RSPH) ranked payday loans as having the most negative impact on mental well-being, followed by unauthorised overdrafts, doorstep loans and weekly payment stores.
For each form of credit that someone said they had used in the past two years, those surveyed were asked how trying to keep up with repayments made them feel - such as whether they felt angry, depressed, anxious, ashamed, or guilty.
WE never want you to pay more than double the amount you've borrowed - whether it's for a new sofa or a loan to help pay your bills.
That's why The Sun has launched a campaign calling for a cap on the total cost of rent-to-own loans and doorstep lending at double the original price or loan amount.
A similar cap was introduced for payday loans in 2015 and since then the number of people struggling with unmanageable debts to those lenders has more than halved, according to Citizens Advice.
People on the lowest incomes, living in the poorest places, are paying a poverty premium - up to 7 million people have resorted to high-cost credit, according to the Department for Work and Pensions.
People whose wages or benefits don't stretch far enough need to borrow from rent-to-own or doorstep lenders to help pay for things such as an unexpected bill or to furnish their homes.
These come with exorbitant rates of interest - more than 1,500 per cent in some cases of doorstep lending.
It is scandalous that one mum who borrowed cash to help keep a roof over her family's head and ended up paying back over THREE times the original amount.
It's time to stop the credit rip-off.
Here's what we demand:
Rent-to-own
Doorstep lending
Nearly half of credit users who drink alcohol said they drink more as a result of their debt, rising to three in five among payday loan users.
The report found catalogue credit came out with better scores than some more mainstream forms of credit.
It said catalogue credit can become part of people's weekly budgets and the products involved - clothes and consumer goods - may make people feel good, even if only for a short time.
It found that almost half found it very difficult or quite difficult to keep up with their repayments on borrowing.
RSPH is calling for stronger action to end the marketing of high-cost credit to vulnerable people.
Lenders should train all employees in carrying out mental health assessments before providing credit, the report said.
It is also urging better signposting to debt and mental health services.
Shirley Cramer, RSPH chief executive and chair of the End High Cost Credit Alliance, said: "It is high time more financial products are developed and targeted with sensitivity to the health and well-being of the public, and not just to exploit their financial situation."
The Financial Conduct Authority (FCA) has been probing the high-cost credit sector and in recent years a cap has been put on the overall cost of a payday loan.
Christopher Woolard, FCA director of strategy and competition, said: "The FCA took over regulation of consumer credit four years ago.
"In this time we have introduced new rules for the payday sector and credit card market. In addition we secured over £900 million in redress for customers where standards have fallen short.
"As we said in January, we continue to have concerns with the overdraft, rent-to-own products, home collected credit and catalogue credit market.
"We are looking at these areas and will be publishing our plans in May of this year."
THERE are lots of groups who can help you with your problem debts.
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Arrangements (IVA) on the and on the Government's
Speak to one of these organisations - don't be tempted to use a claims managment firm that will claim it can write-off lots of your debts in return for a large up-front fee.
The research was welcomed by Hollywood actor Michael Sheen, founder of new scheme the End High Cost Credit Alliance.
The Twilight and Frost/Nixon actor said: "We share a moral responsibility to help protect vulnerable customers from the harm high-cost credit causes.
"The evidence on the impact on our health and well-being is now overwhelming. We have the evidence. Now we need action."
Trade body UK Finance, which represents banks and other financial firms, pointed out that an unauthorised overdraft is not something which is marketed to people and tends to happen when someone has miscalculated their finances.
Banks send text alerts to help people avoid slipping into the red.
A UK Finance spokeswoman said: "UK Finance members are committed to lending responsibly and always undertake a thorough risk assessment of a customer's finances whenever they apply for credit.
"The industry set up the vulnerability task force in 2015 alongside consumer and stakeholder groups to support customers in vulnerable circumstances and to raise lending standards across the industry.
"If a customer is struggling with repayments, we always advise they speak to their lender straight away."
Gareth Shaw, a money expert at Which? said: "Banks have made over a billion pounds a year through unfair unauthorised overdraft fees, which we have previously found can cost considerably more than payday loan charges.
"We want the regulator to restrict these fees, bringing them quickly into line with arranged overdraft charges. The FCA must take swift action on the unauthorised overdraft fees that banks charge their customers - many of whom can afford it least."
IF you're in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget - by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs
Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker
Pay your most expensive credit card sooner - If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them
Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further
Groups like Citizens Advice and Money Advice Trust can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans
We pay for your stories! Do you have a story for The Sun Online Money team? Email us at [email protected] or call 0207 78 24516. Don't forget to join the for the latest bargains and money-saving advice.
