PAYDAY lending is putting people’s health at risk by increasing debt and anxiety among those who are already vulnerable, experts have warned.

A new report, written in Scotland, raises grave concerns about the impact of the industry, which is branded “absolutely corrosive to mental health”, but also suggests rules designed to protect borrowers from exorbitant interest rates could leave people struggling to afford basics with nowhere to turn.

It has been estimated that 1.7 million people took out payday loans across the UK in 2013, and that Glasgow residents borrow more than £57m through payday lenders, home credit deals, pawnbrokers and rent-to-own schemes in a year.

The inflated annualised interest rates, or APR, for borrowers hindered by poor credit can hit 1,509 per cent through the payday loans.

The damning report, by researchers at Glasgow Centre for Population Health (GCPH), lays bare the public health implications of payday lending and highlights one study which concludes those in debt were four times more likely to have depressive episodes, panic attacks or anxiety disorders.

Chris Harkins, public health research specialist at GCPH and author of the new report, said: “I think there was a common perception that the payday lending industry was fixed to a degree.

“But the feedback we were getting from a lot of our third sector, partner agencies we work with was that this issue was very much still alive. They were still encountering families and individuals who were getting into spiralling debt still with pay day lending, but I guess most importantly of all the demand for short term easily accessible credit was not reducing to a huge degree.”

Mr Harkins added: “There is no doubt that spiralling unmanageable debt is absolutely corrosive to mental health.”

The trade body representing short-term loan firms has said there is no evidence to suggest this form of credit damages the health of borrowers.

Glasgow City Council has heard evidence of residents juggling six loans, seeing all their wages disappear on repayments as soon as they come in and borrowing money only to go straight into the “bookies next door”.

It has taken action to address the problem, launching a new scheme to encourage good financial management among secondary school pupils.

On the back of the findings Jackie Erdman, head of inequalities at NHS Greater Glasgow and Clyde, has described payday lending and its implications as a “key public health issue for Greater Glasgow and Clyde”.

Ms Erdman added: “The report raises serious concerns as to the use and promotion of payday loans among financially vulnerable, working populations.

“It shows how many people in poorly paid, insecure work use payday loans to buy food, fuel and to solve housing crises. The report also highlights the difficulty many households have in repaying payday loans including high interest rates and administration fees; which adds further burden to their financial difficulties.”

The report calls on governments and communities to find new ways to help people make ends meet.

Plans are already advancing for credit unions in the city to offer more instant loans on an affordable basis.

Payday lending has allowed people to rapidly borrow relatively small sums of money short-term, but it is associated with very high interest rates.

In January 2015 the Financial Conduct Authority (FCA) introduced a number of controls including a cap on payday loan interest rates of 0.8 per cent a day.

But the recent report also said it is generally understood in the UK that payday lenders open shops in disadvantaged urban areas and quotes a study which found 78 per cent of borrowers used payday loans to buy food.

It concludes that it is too early to assess the impact of the new regulations on the industry and says they”will potentially lead to more responsible lending”.

Report author Mr Harkins, added: “... what this report highlights is that for some borrowers, payday loans had become something of a financial safety net, however toxic. That safety net is still very much in demand, but is now much less accessible for many borrowers struggling to make ends meet. As a society we must develop viable alternatives to payday lending.”

Russell Hamblin-Boone, CEO of the Consumer Finance Association, the trade association representing the major short-term lending businesses, said so-called payday loans are a “valuable part of the credit mix” and there is no evidence to suggest they have an “impact on the health of borrowers”.

He said: “The wider issue, as the report acknowledges, is the difficulties some sections of society have in accessing credit. This could leave some people vulnerable to other unregulated credit sources. Our members are regulated and carry out stringent affordability checks before a loan is issued, on average only around eight per cent of applications are approved.

“We would welcome the opportunity to work with the Glasgow Centre for Population Health to discuss the wider issues of access to credit this report highlights. We are already working with the Money and Mental Health Institute to explore some of the issues in the wider credit sector and how we can protect some of the most vulnerable people in our society.”