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Downturn means payday for Britain's high-cost lenders
LONDON, March 25 (BSS/AFP) - Young British administrator Steve Perry had never heard of payday loans when, three years ago, he wondered how to get the cash to spend a weekend away with friends.

Tired of scrimping on his low income, Perry went online to
look for a solution, and was delighted to find a source of quick
loans with few questions asked. But within eighteen months, he
was 22,000 ($34,800, 26,300 euros) in debt and contemplating

"I couldn't tell anyone -- it swallowed me up whole," Perry,
now 30, from Lancashire in northwest England, told AFP. "I sat in
my car and cried my eyes out."

Perry had discovered the expanding world of British "payday
lending" -- short-term, high-interest loans for small amounts
designed to tide consumers over until their next paycheck

The loans are usually for amounts well under 1,000 and are
agreed for up to a month, with interest rates that turn out to be
gargantuan when expressed in annual terms.

Lender Wonga says its typical annual percentage rate (APR)
is 4,214 percent. Its rivals include The Money Shop -- owned by
US firm DFC Global and which has an aggressive UK expansion
policy - - as well as Payday UK, Payday Express, Quicksilver,
Cheque Centres and QuickQuid.

Since his debt spiral, Perry has become a vocal campaigner
against the industry, which leapt into the space left by the
contraction in traditional consumer credit, and grew as the
economic downturn bit and living costs rose.

Payday loan stores mushroomed on Britain's more down-at-heel
high streets, while ads on buses, radio and TV suggest borrowers
might use the loans for occasions from university beer binges to
taking a taxi to see a dying relative.

Statutory watchdog Consumer Focus estimated the number
taking out payday loans in Britain quadrupled from 2006 to 2009,
when 1.2 million people borrowed 1.2 billion. Analysts Stephens
say that figure was 1.7 billion by 2010.

Housing charity Shelter said in January that almost a
million people had taken out a payday loan to help pay rent or
mortgage costs in the last year.

The sector is lightly regulated in Britain compared with
elsewhere, but the Office of Fair Trading, which enforces
consumer protection law, launched a major review in February amid
concerns lenders were exploiting people in financial trouble.

The firms argue they offer a useful service for customers
who know a payday loan is better than alternatives like
unauthorised overdraft charges or, at worst, illegal loan sharks.

"We don't have customers with problems, we've just got
campaigners and activists who don't use the product with
problems," said John Lamidey, chief executive of industry body
the Consumer Finance Association.
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