CITIZENS’ advice chiefs are hoping to block plans to open a credit shop amid spiralling debt problems among families.
East Durham Citizens’ Advice Bureau (CAB) has objected to a planning application for The Money Shop to take over the former Claire’s Accessories store in Peterlee’s Castle Dene Shopping Centre.
The CAB, also based in the shopping centre, has blasted the type of services the firm provides, including “payday loans” that provide quick cash until payday, after seeing the number of people in debt through such schemes double in recent months.
East Durham CAB chief executive Neil Bradbury said such initiatives “don’t help people manage their debt, they make them worse.”
He said: “We are concerned as a charity by the profusion of what we would call unsustainable credit shops setting up in Peterlee, including cash-for-gold schemes, pawnbrokers and shops selling monthly payment schemes, often with very high APR levels, and now pay day loan companies.
“We have just seen a number of clients coming in with debt problems related to such situations rocket by 50 per cent in the last few months.
“As an absolute emergency, a once-in-a-blue-moon stop-gap for credit, they may be ok for some people.
“But we are concerned people are just using it to push money around and not solve the problem.”
Mr Bradbury said 40 per cent of the CAB’s clients nationwide have high-cost credit loans.
He added that people with payday loans have on average eight debts whereas those without have five.
“People aren’t using it as a sensible alternative to other forms of credit,” he added.
“There are APRs of more than 200 per cent interest on their pay day loans.”
He said: “Clearly we have a problem with institutions like this.
“The more these people set up shop in a town, the more people are tempted to find what they see as the easy way out rather than the real way of solving their debt problems, which is to seek advice.”
The proposed shop would be next to a cash-for-gold type shop and bureau chiefs are also objecting on planning grounds, saying the shopping centre needs more retail units rather than financial services.
A Money Shop spokesman said: “Payday loans are an essential service for those unable to secure finances from traditional lenders and can be a significantly cheaper alternative to an unauthorised bank overdraft or exceeding agreed limits on credit cards, ensuring that the costs of borrowing remain lower for the short term.
“While we would not suggest that people replace regular income with a payday loan, our service is a competitive short-term credit option when people are faced with more month than money.”
Concerned parties have until December 29 to take part in a consultation on the plans and a decision is expected in early January.
The Mail reported earlier this week that Easington MP Grahame Morris is calling for tougher action against loan sharks, as the Office of Fair Trading launches an investigation into the high-cost credit payday loan market where interest rates can reach 5,000 per cent.