Dependence on payday loan companies is becoming more and more common among students, the Citizens Advice Bureau (CAB) has warned.
Research conducted by the foundation found that payday loan companies provide up 62 per cent of all commercial financial support taken out by students. The study also found that just eight per cent of students were in debt due to overdrafts and credit card use.
The Campaign for Fairer Gambling also compiled evidence on the subject, revealing that Glasgow has the highest concentration of payday loan companies in the UK.
The campaign statistics show that Glasgow has 51 payday loan company branches, with Birmingham, the next highest, playing host to 45, despite having almost double the population of Glasgow.
Speaking to The Student, Fraser Sutherland, from Citizens Advice Scotland, said: “The impact of such loans, when not supplied in an affordable way, can be devastating including to students.”
He added: “One law student we helped had taken out four different payday loans to help meet other debts he had to pay off but was now seriously struggling to pay back as the debt had risen to over £6,000.”
According to The Guardian, loans from Wonga.com, one of the most influential payday loan companies in Britain, charge interest of up to 5,853 per cent per annum. The company was recently forced to cancel customer debts worth over £230 million, as reports showed they did not confirm the clients could pay the loans back.
Steve Norman, assistant director at the University of Edinburgh Careers Service, told The Student: “If a payday loan seems necessary we’d recommend talking to people who offer practical, impartial help and advice with financial management, e.g. the Advice Place or CAB, as there may be alternative options.”
At the Welfare Committee meeting last week, Eve Livingston, Vice President Societies and Activities at Edinburgh University Students’ Association (EUSA), discussed plans linking the university with a branch of Capital Credit Union (CCU).
Last year, the government announced plans to increase the availability of credit unions. The Credit Union Expansion Project received with a view to increase membership to two million by 2017.
Membership at the Bank of England credit union saw a rise of nearly 17 per cent in the year ending September 2013.
Countries like the United States have succeeded in encouraging credit union use, with just under half of all Americans participating in a credit union scheme.
In a bid to limit the influence of payday loan companies, the coalition government introduced plans earlier this year which would require payday loan companies to obtain permission to operate.
According to CAB figures, the use of logbook loans will increase by 61 per cent in the next year.
Representatives of payday loan companies could not be reached for comment.