All four parties at the Assembly this week were united in their condemnation of high-interest loan companies who offer quick loans at eye-watering interest rates  – sometimes in excess of 4000%.

It is one of the issues raised at the weekly surgeries which Kevin Brennan and I hold, where constituents have been enticed into taking a small loan to make ends meet and then struggle to meet their repayments.

New research by insolvency trade body R3 reveals that 3.5 million adults are considering taking out a payday loan over the next six months.  The same research also shows that of those sampled who had taken a payday loan, 60% regret the decision and 48% believe the loan has made their financial situation worse. Only 13% believe their payday loan had a positive impact on their finances.

Frances Coulson, R3 President commented:  “Payday loans are not the best way to resolve debt struggles. We know that many who take them out find them to be a negative experience, often escalating financial troubles.”

Some 60% of those surveyed worried about their level of debt, and 45% struggled to make their money last till payday, rising to 62% for 24-44 year olds, R3 said.

R3 says the survey reveals money worries at the highest level it has ever recorded, and consumer bodies have called for tougher regulation around payday loans. One in six are so-called “zombie debtors”, who are only able to service the interest on their debts.

The payday loan companies like Wonga and QuickQuid are now a £2bn-a-year business.  If the money is paid back promptly on the next pay day, this type of lending can be cheaper than paying an unauthorised overdraft or a credit card charge.  But if the loans – some charging interest rates of more than 4000% – are rolled over, debts can quickly escalate.

Last month the Citizens’ Advice Bureau warned the number of people running into debt through payday loans has quadrupled in two years.  It says it is too easy to obtain such credit and it is calling for tighter regulation, along with Consumer Focus, the UK’s official consumer watchdog.

We need to look beyond the symptoms of pay-day loans to look at their causes as well. There is the declining share of national income that goes to workers, the impact of unemployment and the failure of regulation to meet the challenges that pay-day loans companies create.   Financial exclusion is very real and people in the poorest households often rely on credit to meet their basic needs.  Many people do not have access to financial services – not even a bank account.

Predictably in this harsh economic climate, illegal loan sharks have flourished but shockingly, so have legal loan sharks.  It is the predatory nature of these companies that is so worrying.  They offer quick and easy access to finance – often to the poorest and most vulnerable people and those least able to manage their debt.  Interest is charged on interest until borrowers are forced to do without essentials just to service their debt.  Remarkably, in this unregulated market these payday loan companies or legal loan sharks are able to proliferate, They are allowed to advertise their services unchecked in the mainstream media• I have heard examples of homeless young people being targeted by legal loan sharks while Wonga quickly withdrew a promotion on its website recently targeting students with easy access loans after a national outcry.     Wonga, for example, has even launched an iPhone application which allows a borrower to have a short-term loan directly transferred into their account within the space of a few minutes – this comes with a whopping APR of 2689%!

Stella Creasy MP is waging a high profile campaign calling on the UK Government to regulate the activities of legal loan sharks.  She said:  “We know that there has been a fourfold increase in payday lending since the recession began, and that due to a lack of regulation in the market in the UK, The Money Shop, Wonga, Provident, BrightHouse and other companies are expanding across the country at an alarming rate. Indeed, they have already pointed to the government’s policies as increasing their customer base.”

February  13th will see the launch of the first ever television advertising campaign by credit unions in Wales. It will run for a month. It will go head to head with pay-day loan companies at the time of day when they use advertising to promote their pernicious products.   Credit Unions offer  easier and cheaper ways of borrowing and provide a great service to the many individuals and communities who would otherwise have no access to affordable credit.  I hope that everyone will look out for those adverts and spread the word that Credit Unions are the best defence against exploitation of some of our most vulnerable people .