Watchdogs are investigating after it was reported by workers at a city centre Ladbrokes – in Birmingham, that a man borrowed multiple payday loans in front of them to gamble with. The man in question, a gambling addict, then lost the several hundreds of pounds in loans he had just received on fixed odds roulette machines
The machines, a hotly contested aspect of local betting shops, have been daubed as ‘crack cocaine’ betting terminals due to their highly addictive nature amongst users.
The user in question, who has since reformed his betting habit and says he hasn’t bet since, came forward after feeling that the staff in question should have intervened to stop his gambling addiction.
The local man took out two separate loans for bad credit in front of staff, who knew what the money was intended for but yet failed to stop him putting the money straight into the fixed betting terminals (FOBTs). This after they had already witnessed him losing hundreds of pounds throughout that day in the betting terminals.
Never a good idea
The payday loans market has recently come under increased regulation with lenders and those applying now reportedly under closer scrutiny on borrowing and affordability.
The loans are designed as small short term loans to tide people over only in an emergency. Frankly if you have any level of debt which you know is not going to go away then it is probably best to stay away from payday loans – as they can easily make the situation worse rather than better.
The problem with these loans is the high rate of interest. If you are borrowing £100 for one week and paying back £125 then repaying the loan won’t be so bad.
The problem is that many people borrow £1000 and end up having to pay back £1300 and obviously this is more difficult.
A high proportion of those borrowing from payday lenders borrow repeatedly. This suggests that once in debt certain people have trouble breaking free from an already difficult financial situation.
This is another good reason not to get a payday loan as once you are in debt it can be very difficult to get out.
Review on FOTBs also imminent
The story comes weeks before a proposed review of the highly addictive fixed odds betting terminals in the UK. Campaigners and advocates are calling on the Government to reduce the maximum stake allowed on the machines from the current maximum of £100 to a more modest £2.
While both payday loans and FOBTs are still legal in the UK, both have come under increased pressure and calls for them to be banned outright.
New loan regulations since May
There were a slew of new regulations on lenders of these loans only recently, all designed to cut down on such situations and regulate what had been seen as the ‘wild west’ of payday lending.
These changes and new rules included;
- A requirement for all lenders to advertise on at least one price comparison website.
- All websites now required to display prominently a warning about the use of these loans and to link to the financial regulatory body.
A price cap on all payday lending was also introduced; this has seen a drop in the numbers of customers applying for loans and fewer customers also being funded within loans, as a direct consequence.
The Consumer Finance Association, which represents payday lenders, says the price cap has already resulted in 600,000 fewer consumers having access to credit.
The incident that happened in Birmingham city centre has since been reported to the Gambling Commission and officials are now investigating.
The current code of ethics for operators of the FOTBs is, however, very clear and it has been reported that they are taking the report ‘very seriously’.