Desperate North teens are saddling themselves with payday loan debt with the help of their parents, it is claimed today.
A shock report by Action For Children has unearthed “worrying levels of borrowing” in the region among young people aged from 12 to 18.
Research by the charity reveals one in eight borrowed money from companies and an alarming 41% said they had used a payday loan company.
While it is illegal for anyone aged under 18 to get credit, Newcastle’s Citizens Advice Bureau (CAB) said staff had dealt with cases where parents or guardians had sought payday loans on a youngster’s behalf.
And bureau Chief Executive Shona Alexander said the hidden debt epidemic is leading to relationship breakdown within families as teenagers – the age group most likely to be on a zero hours contract – struggle to repay relatives.
“It is a serious problem,” said Shona, who called for the credit age to be raised to 25. “We know that young people have forged the signatures of adults and that they have pressured parents or grandparents into getting a loan for them or being their guarantor.
“When they can’t pay them back, the adult’s credit rating is seriously damaged and then it is not just a debt problem but a relationship problem.
“Young people don’t know how to manage money. Something needs to be done.”
Frontline staff see young people seeking debt money to replace household goods, set up their first home or keep up with pals. High street lenders, including store cards, were used by a third (38%) of those able to get credit, the survey said.
Action For Children said the Government must fund more debt education to stop another generation of young people from a cycle of debt and bad credit.
It comes as the charity publishes its Paying The Price report ahead of Christmas amid fears the expensive festive season could be a trigger.
The report unveils how that 55% of children have not received any financial education.
And of those who had, 87% learnt from parents or carers while just 27% learnt about money at school.
The CAB added its Stockton branch had run a successful service helping to educate young people on the dangers of debt which had now disappeared because of public sector cutbacks.
Shona added aggressive marketing campaigns from payday loan companies were attractive to young people and credit firms were likely to change tack after reforms in 2015 to sell more guarantor-style short-term loans.
“Young people don’t understand interest rates and they don’t get into the regular habit of saving,” she said. “We have really got to start education at primary school age and keep that going. Too much of the debt education that we have is short-term.”
John Egan, Action for Children’s operational director of children’s services, said by becoming bogged down with debt from a young age, countless young people from the region could have their future marred by unemployment and mental health problems as a result.
He said: “High interest products and companies are now far too easy for young people to access.
“Some young people are less likely to have the financial skills they need, they may have to live on a low income or are not in education. They are also not able to learn about money at home or at school where other young people do. Add in baffling financial jargon and a lack of knowledge will dramatically create a vicious circle of debt, increasing the risk of mental health problems and unemployment.
“We cannot afford to let children pay this price because of a simple lack of financial education. They must be equipped with the necessary skills to make informed money decisions to give them a chance of a happy future.”
Source – Middlesbrough Evening Chronicle, 14 Dec 2014