WIREDGOV

62 per cent of young people using high-interest credit are turning to payday loans

People aged 17 to 24 who are struggling to make ends meet are more likely to turn to risky credit options like a payday lender, than other types of credit.

Citizens Advice clients aged 17-24 make up 10 per cent of all of the charity’s serious debt cases, but are more than 15 per cent of the cases where debt has been caused by taking out a high-cost loan. Payday loans accounted for 62 per cent of the high-interest credit used by under-25s.

The new figures published today are part of an in-depth analysis of nearly 30,000 of the most serious debt problems experienced by Citizens Advice clients, 3,000 of which were debts held by people aged between 17 and 24. The charity reveals that even young people who are employed can get into serious financial trouble, with more than one in three severe debt clients aged under-25 being in work.

Less well-known types of high-interest credit, such as guarantor loans and logbook loans are also a cause of people falling into debt. Guarantor loans are those in which another individual is listed as being liable for repayments if the borrower cannot make payments.

Citizens Advice has also forecast that the number of logbook loans, where people use their car as a security to get a loan, is set to rise by 61 per cent this year.

Data released by the charity today show that, of Citizens Advice clients in serious debt, 10 per cent are aged between 17 and 24, of which:

• Nearly one in five (19 per cent) is in rent arrears.
• Just 8 per cent of those are in debt because of mainstream credit (an overdraft, bank loan or credit card).
• 30 per cent owe money on their mobile phone bills.
• 15 per cent have debts on a credit card.
• Almost a quarter (23 per cent) are behind on their Council Tax payments.
• 14 per cent of those people with a payday loan debt had also fallen behind with their housing costs.

Citizens Advice Chief Executive, Gillian Guy, said:

“Generation Y is fast becoming Generation Credit. The housing and money pressures on young adults are significant and it is a big concern that one in three young adults in serious debt is employed.

“It is a big concern that so many young adults are turning to some of the most expensive types of loan to get by. Taking out a payday loan in your late teens or early twenties can have significant and damaging consequences for later life. Often, high-interest loans end up spiralling out of control and many people in debt end up feeling they have nowhere else to turn other than a vicious circle of more borrowing.

“Young people face the dual challenge of getting a foot on the jobs and housing ladders. It is extremely welcome that the jobs market is recovering and that the number of young people out of work is falling, but problems about jobs and pay remain a big issue for under-25s. For young adults, accessing a job and home of their own are key to living independently and too many of those who are struggling to get by, end up in serious debt because of high-interest and dangerous loans.”

The crisis in youth unemployment has been one of the major features of the recession of recent years, with around one million under 25s out of work or education. Whilst this number has fallen, more than 700,000 young people remain frozen out of the economic recovery.

Of those young people able to find a home of their own, many struggle to keep up with their rent, with Citizens Advice dealing with a 57 per cent increase in homelessness problems for under-25s from the start of recession to 2013.

Case studies:

• One Citizens Advice client in Spalding took out a high-interest loan, with her sister as the guarantor. When the client was struggling to make payments, the lender began sending text messages to her sister’s young son asking for money.

• A 22 year old man in the South East bought a car on the internet for £1,300. One morning he woke up to find his car apparently stolen. When he contacted the police he was told that it had been legally repossessed by a logbook loan company. He had never been told about the loan and had nothing to do with the arrangement.

Citizens Advice

Notes to editors:

1. This year the Citizens Advice service celebrates its 75th anniversary. We’ve planned a year of activity running from January to December 2014. Contact the press office on 03000 231 080, or via email a press.office@citizensadvice.org.uk, to find out more.
2. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the Citizens Advice website.
3. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.
4. To find your local bureau in England and Wales, visit citizensadvice.org.uk. You can also get advice online at adviceguide.org.uk
5. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers
6. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 6.6 million problems from April 2012 to March 2013. For full 2012/2013 service statistics see our quarterly publication Advice trends
7. Citizens Advice service staff are supported by more than 22,000 trained volunteers, working at over 3,000 service outlets across England and Wales.