Payday lenders target hard-up parents with 1,600% ‘back-to-school’ rip-off loans

CASH-STRAPPED parents are being targeted with “back to school” loans by payday lenders – with eye-watering interest rates of up to 1,605 per cent. Marketing posts even encourage struggling parents with “poor credit scores” to apply to help cover essential uniforms, stationery, and shoes.But the fine print reveals the brutal cost. Manchester-based Loan Pig offers two-to-12-month loans with interest rates between 49.9 and 1,605 per cent. A blog post on its site lists borrowing alongside other money-saving tips, stating: “Unfortunately, with everything that is needed, for example, school uniforms, shoes, bags, and stationery, everything can soon rack up to quite a substantial amount. Sign up for the Money newsletter Thank you! “So, many families may find it difficult to afford the items without some sort of preparation or general purchase plan.” The post then directs parents – including those with “poor credit scores” – to apply. A representative example on the firm’s website shows a £300 loan over three months at 1,335 per cent APR costs £457.95 in total (£152.65 a month). And borrowing £150 for six to 12 months to cover the average £140 PE kit costs double the original amount (£300). Under Financial Conduct Authority (FCA) rules, total repayments cannot exceed double the borrowed amount, and daily charges are capped at 0.8 per cent. Loan Pig charges this legal maximum. Rival firm Mr Lender also charges the maximum daily limit, with repayment rates of up to 1,462.3 per cent APR. Most read in News Money Its blog claims “the new school year doesn’t have to mean a huge dent in your wallet”. Yet below tips on buying early and reusing stationery sits a loan boxout. And according to its own calculator, borrowing £200 over six months costs £374.61. Clockwise Credit Union similarly promotes back-to-school loans, stating: “New uniform, school bag or more books – this time of year can be expensive” beside an “apply now” link. It adds: “Do you receive child benefits? You may be eligible for our family loan.” Clockwise charges 42.6 per cent APR on £500 over 12 months, costing £602.82 in £50.24 monthly instalments. Free council grants for school uniforms exist across Wales, Scotland, Northern Ireland, and parts of England, alongside regional fair-rate lenders. Consumer expert Martyn James called the marketing “morally unacceptable”. He told The Sun: “Short term, high interest lending only exists because banks and other traditional lenders have shown no interest in helping people struggling to make ends meet borrow small amounts affordably. “But targeting parents with these loans for essential purchases is morally unacceptable. Why? “Because there are a wide range of grants, local support from councils, second hand free exchange services and even in school schemes to help poorer parents. All available now and all free. “Encouraging people to borrow when help could be just a call away for free is unacceptable.” Adam Butler, Public Policy Manager at StepChange Debt Charity, said: “Short term, high cost loans can put pressure on anyone’s finances, particularly if they are already struggling to make ends meet.“Our research shows parents with younger children are particularly at risk of debt problems. “YouGov polling we commissioned at the start of summer revealed among parents with at least one child under 18, one in five have used credit, loans or an overdraft to make it through to payday in the last three months, compared to just one in ten among the wider population. “If you are worried about debt or your finances as the back to school season begins, don’t hesitate in reaching out to your creditors for support, and getting free, impartial and non-judgemental debt advice from a charity like StepChange.” Loan Pig, Mr Lender, and Clockwise Credit Union were all contacted for comment. HOW YOU CAN GET HELP WITH DEBT Money expert from Stepchange Adam Butler says these sky-high interest rates are legal under the regulator’s rules so it can be tricky to escape. However, if you think you mis-sold the loan in the first place, you DO have options. If you couldn’t afford the loan when you took it out then you could have a case for an “unaffordable lending” complaint. Contact your lender directly and tell them you think the loan should never have been approved. TOP TIPS IF YOU’RE STRUGGLING WITH DEBT: 🔹 Talk to your lender– Don’t bury your head in the sand. Whether it’s a loan, credit card or household bill, lenders regulated by the FCA have a duty to help customers in financial difficulty. The earlier you speak up, the more options you’ll have. 🔹 Know your numbers – Work out exactly what’s coming in and what’s going out each month. Once you can see it in black and white, it’s easier to spot where you can cut back – whether that’s to clear debt faster or start building an emergency pot. 🔹 You’re not alone– Debt charities like StepChange offer FREE, confidential advice tailored to YOUR situation. They can help with budgeting, negotiating with lenders, or finding a solution that works for you. No judgement, just help. Comment now