Rising numbers of borrowers are turning to loan sharks since tighter regulation of payday lenders was introduced, a new report claims.
The Consumer Finance Association, which represents short-term lending businesses in the UK, said that new consumer credit regulations are to blame for a 70 per cent reduction in access to short-term credit, resulting in new risks for low and middle-income borrowers.
City watchdog the Financial Conduct Authority introduced tougher regulations on payday lenders last year in a bid to stop debts spiraling out of control.
Shark attack: Regulations introduced to cap fees and interest imposed by short-term
lenders has resulted in an increase in the number of loan sharks, according to a new report
Short-term lenders were banned from rolling over a loan more than twice, and they can only make two unsuccessful attempts to claw money back out of a borrower's account.
Payday lending has completely transformed since the new rules were introduced, with several lenders dropping out of the market and others cutting back interest rates, increasing their lending criteria and overhauling their advertising - including the retirement of Wonga's puppets.
In June, Citizens Advice said the number of payday loan problems reported to it had halved compared with the previous year.
Category: Payday loans