The number of people running into debt after taking out a payday loan has quadrupled in two years, consumer charity Citizens Advice warns.

Consumers are increasingly taking out such loans to tie them over for a few days or weeks, often until they're paid, hence their name.

Key Points

  • Payday loan debt quadrupled in two years
  • Citizens Advice calling for tighter regulation
  • Government deciding whether to cap costs

But Citizens Advice says it is too easy for consumers to obtain short-term credit. It has seen the numbers asking for help with debt problems after taking out a payday loan quadruple in May to July this year, compared to the same period in 2009.

The charity is now calling for tighter regulation from the Government to try to stop consumers from falling into a debt cycle.

Consumer group Which? says payday loan providers typically charge from £20-£35 for a short-term £100 loan. Meanwhile, late payment penalties can be onerous.

These combined fees can add up to a large proportion, or even exceed, the loan amount.

Tighter regulation

Peter Tutton, social policy officer at Citizens Advice, told the BBC ministers need to take action on payday loans.

Tutton said: "The sort of regulatory regime isn't working to protect people, so there's work for the Government to do.

"The Government needs to look at consumer credit regulation and get really serious about making it more effective.

"We need better sorts of messages to firms that it's not acceptable to treat people badly."

The Government has also faced increasing pressure to consider capping the cost of payday loans and other types of high cost credit, in particular from Labour MP Stella Creasey.

The Department of Business Innovation and Skills (BIS) announced in July it was going to conduct further investigations into the market before deciding whether or not to cap the cost of these loans.

At the time, consumer affairs minister Ed Davey said: "We do not want to force people into the arms of the loan sharks so we need robust evidence of what the impact of this might be before we decide if action is required."