Episode 3 My Worst Deal

We all like to think we're getting a fair deal for our money,

whether we're buying, selling or taking out a loan.

And when times are hard it matters even more.

But many of the deals on offer could cause you real problems.

Some could even wreck your life.

ALL CHANT: Say no to payday loans.

Coming up, the controversy over payday loans -

we look at easy credit on the high street.

The man in the Money Shop

just told me he's never seen a payday loan application be refused.

How one couple's worst deal turned out to be an illegal fraud

that left them £40,000 out of pocket.

It was just...absolutely horrendous, every day was...was a nightmare.

And how dealing with a loan shark can have violent consequences.

He beat me about my head and he took the money that I had.

With the cost of living shooting up, many of us

are finding it increasingly difficult to make our money

stretch to the end of each month.

But in these times of crisis there are companies out there

promising a great deal - or so they say.

Wonga.com offers cash loans.

What's refreshing about wonga.com is that YOU control the loan.

Payday loans - as they're known - claim to provide

a speedy solution for life's little cash emergencies.

You can walk into the shop, or log in online,

and within minutes the cash you need is in your pocket.

It's so quick and simple.

There's nothing to fax and no extra paperwork to send.

Sounds easy. But with the highest interest rates topping

an eye-watering 4,000% APR, payday loans have earned

a reputation for sucking people into a spiral of debt

and leaving many believing they're the worst deal they ever made.

You're borrowing just before you've got paid

so you're already spending next month's wages.

So if you can't then pay that loan back out of next month's wages

then you have to start borrowing from the following month's wages

and it's very easy to get into a spiral of debt where you're just

taking loan after loan out to pay back the previous month's debt.

And that is exactly what happened to Richard Merritt from West London.

Like so many of us, Richard's salary never seemed to go far enough

and he took a series of payday loans

and ended up thousands of pounds in debt.

His first loan was £250

but he then realised he needed more.

I had to take out another one

because I was paying back the interest on the first loan,

which made me then short of money, erm, to pay me other bills.

So I took out another one to cover the interest of that one.

And...so it went on.

The financial burden of paying off his payday loans

meant Richard lost his flat and had to move in with his sister.

It also means he has to cut down his household spending

to the very minimum.

Just the basics here.

My weekly shop I probably get done for about £15.

Taking a payday loan is becoming more common in the UK.

John Fairhurst runs a free debt-management company.

He's worried that borrowers are getting hooked on a monthly loan to tide them over,

without realising the consequences.

The rates of interest are many hundreds of per cent,

which is very high if you're using these things on a regular basis.

On a one-off basis people may consider it's a small price to pay

for an easy process, but what we're seeing is people who

take out multiple payday loans repeatedly, and the cost of that is extortionate.

Over two years Richard took out ten payday loans.

As bills came in he found he needed to go online

and apply for a loan just to stay financially afloat.

He took out multiple payday loans from different companies

all at once.

At one point, the high interest on his loans meant he had to pay £1,000 in one month

and the payday loan companies were chasing him for payment.

They threatened to ring me at work,

which was sort of a bit embarrassing.

You tell them to stop ringing you at work but they're still persistently doing it.

Put me under a lot of stress.

Richard turned to a free debt management service for help.

I got in contact with them, explained my situation,

and they were very sympathetic.

Went through my debts with me and found out exactly how much I owed,

which at the time was over £5,000, which was quite frightening.

Richard borrowed from around ten different companies.

At the point he hit real financial difficulties,

he owed between £1,500 and £2,000.

In a few months,

that went up to that figure of £5,000

because of the high interest rates and charges for the payments he missed.

The debt-management company supported Richard

and negotiated with the payday loan companies a monthly payment of 100,

which Richard can afford.

He no longer uses payday loans.

It would be hard to find credit more expensive than a payday loan.

If you have alternative sources of credit and you need a loan,

then you should look there first.

What payday loan companies should be doing is making sure they understand their customer.

As soon as they walk into the door or come onto the website they carry out a thorough fact-find,

they understand what other debts they've got and in some cases they turn them away.

I definitely wouldn't recommend anybody take out a payday loan.

It was the worst thing I ever did.

Coming up, we visit payday loan shops on the high street

and see what people can expect if they're tempted to apply.

The man in the Money Shop just told me that he's never seen a payday loan application be refused.

When you apply for a loan, the deal might involve an arrangement fee.

It's perfectly legal.

But some illegal companies are taking advantage of this practice,

demanding upfront fees to arrange loans that never arrive.

That's what happened to Colin and Julie Stoneley from Surrey.

Since 2003 they've run a llama trekking company

out of their rented cottage in Guildford.

But when a local pub came up for sale,

they thought it would be the perfect opportunity to expand the business.

Instead it turned out to be their worst deal.

Part of the financing involved mortgaging our house in Spain.

So we tried various Spanish banks - remortgaging in Spain is almost unheard of -

and eventually found an ad which was running in the Times

and the Telegraph week after week

for a company called Gresham Finance.

The company had plush offices in central London

and was headed by entrepreneur Edward Davenport.

Colin and Julie were impressed,

and after a meeting with Davenport's second-in-command, Peter Riley,

they decided to borrow the extra £300,000 they needed to buy the pub.

There was an upfront fee, as I remember, of 3,500 to start with.

Then we paid a similar fee for something else, and we then funded

various things, the surveyor's trip to Spain and other bits and pieces.

You know, so...the total was about £14,000.

With the agreement in place and the loan on its way,

the Stoneleys handed in their notice on the cottage

and packed up all their belongings ready for the move.

But on the day of completion, the money didn't arrive.

We obviously were very, very concerned about this,

we phoned and said, "What's happening?" because we had our whole home packed up in a van,

the people selling the pub had all their belongings packed up

and obviously the people they were buying from were in the same position.

Colin and Julie rang Peter Riley, the man they'd been dealing with at Gresham Finance,

who told them that there'd been a hitch with the money,

but it would be in their account in a couple of days.

At that time I think we actually believed there'd been a hitch

so at that point I don't think we felt...in danger, if you like, of anything,

we were just a bit concerned, bit shocked.

And the money was going to be there on Monday.

The Stoneleys arranged to stay at a friend's house for the weekend.

But when Monday arrived, the promised money didn't.

We were told the money would be there on Friday,

and then we were told the money would be there the next Friday,

and this situation continued...

well, it continued for three months basically,

by which time we'd moved all our belongings into a shipping container,

the landlord of the pub was back here running the pub,

all the other people in the chain hadn't been able to move,

and it was just a disaster, wasn't it, really?

Emotionally, I think...

..just...our whole life was just so difficult during that period.

It was awful.

It was only because of support from friends and family that we got through it.

To make matters worse, the other people in the chain started chasing Colin and Julie for money,

demanding that they pay all the extra expenses caused by the delay.

The sort of things you're liable for. This is further up the chain.

Lost holiday due to uncertainly of situation.

Two lots of removals.

Litigation costs.

Council tax for rental property.

-Failure to complete at the right time.

-That was £10,000.

The other finance thing we had to put in place for Spain, 6,500, and so on.

-Interest for failing to complete.

-Was another £10,000.

The Stoneleys ended up having to pay almost £40,000 extra

to cover fees and expenses for the other people in the chain.

And to make matters worse they were still living in their friend's spare room with their lives on hold.

I don't know how we got through it, to be honest, it was just absolutely horrendous, every day was a nightmare

because you didn't know what was going to happen -

we were facing total financial ruin, erm...

or we were going to get the money that day and move in and everything would be all right.

And, um...

Yeah, it was quite tough.

By this stage Colin and Julie were starting to get suspicious

and decided to pay Gresham a visit.

Well, we went up to Portland Place, where their office was,

and we sat in the foyer all afternoon and we called Peter a few times

and he said he was on his mobile, he was out of the office.

At about 4:10 we rang him again on his mobile and started to climb the stairs.

And he said, "I'm still not in the office,"

and by this time we could actually hear his voice through the door.

We pushed the door of his office open

and said, as we faced him on the mobile to us, "Didn't think you were in the office, Peter."

But even though they'd just caught him in a lie,

once again Peter Riley managed to convince the Stoneleys that the money was on its way

and that if they could just wait a few more days everything would be resolved.

By this stage I think... Did we smell a rat? We weren't happy but it still seemed very plausible.

He was extremely plausible as a conman.

The penny finally dropped

when Colin saw an article in Private Eye magazine

linking Edward Davenport and the Portland Place offices

to a suspected loan fraud.

And that night I wrote a letter which said, "We've been promised this..."

and I listed the various promises, and I said,

"Unless you return our costs in full,

"or supply the money by Friday,

"I will go to the FSA and the police."

And by return of post we had a cheque for £14,000.

Which...

..I think we were very lucky.

Even though they got their Advance Fee back, Colin and Julie

were still nearly £40,000 out of pocket thanks to Gresham Finance.

And it wasn't long before the company caught the eye of the Serious Fraud Office.

When we started investigating Gresham we found their own records showed

that between about 2007 and 2009 there'd been up to 100 victims

and they had lost between them up to about £4 million in just the advance fees.

But it's not just businesspeople borrowing thousands who can fall prey to this kind of trap.

Fraudsters will target anyone who is desperate for money,

offering loans in return for a so-called arrangement fee,

typically between £50 and £100.

But once the fee's been paid, the loan never arrives.

In fact, last year over 3,000 people complained to

the Office of Fair Trading after getting involved with a loan scam -

that's an increase of 50% from the year before.

In the time of a recession this is an ideal opportunity for fraudsters to prey on victims.

It's important to understand what you're supposed to get for your money.

If you're borrowing from one of the high street banks

you can be confident that if they say there's an upfront fee then that's a legitimate charge.

But if you are in any doubt whatsoever, I would say don't pay anyone any money, be very careful,

and know the person that you're trying to borrow from.

Edward Davenport and Peter Riley

were each jailed for seven years and eight months.

It kind of gave us the justice we wanted,

the proof that actually we weren't bad people...

You know, because it did make us feel...like we were really bad people

because of all the other people's lives that were affected.

Colin and Julie eventually managed to get the funding together

to buy the pub, although they'll never get back

the £40,000 they had to pay out for the delay.

It was a horrendous experience that dragged on and on for months,

taxing on our health and horrible for everyone, emotionally,

financially, everything. And...

..I'm just really pleased that the people involved are behind bars for a few years.

One of the worst deals anyone could ever make is to get involved with a loan shark.

That's what happened to Andrew.

That's not his real name and we've also disguised his voice.

He borrowed £1,000 from a mysterious friend of a friend.

It's absolutely totally wrecked my life. Shattered.

To a million pieces.

Andrew's problems started when his car broke down.

With no way of getting to work, he needed cash to fix it, fast.

But, with a large loan already in place and a poor credit rating,

Andrew knew he couldn't borrow from the bank.

A friend introduced him to a man who could help.

I was very impressed. The gentleman was smartly dressed, he was extremely friendly,

he sympathised with my situation

and I thought what a...

I thought what a really nice guy he was.

Andrew borrowed £1,000,

and agreed to pay back £2,000 in instalments of £150 a week.

He was told, if he missed a payment, that was OK,

it would just double up the following week.

As far as I was concerned what it meant was that, if I didn't pay him the 150 quid on that particular week,

he would accept a higher payment the following week.

The man told Andrew that each week he should expect a call from a withheld number.

The caller would give him a codename and tell him

when and where to bring the repayment.

I knew it was not 100% legitimate but I couldn't do anything else,

and it was only because I wanted to go to work that I took it,

and I thought, well, "You'll be OK."

The first couple of weeks Andrew managed to make the repayments,

but in the third week his rent was due and he didn't have enough spare cash.

He went to the meeting place

and told the man he didn't have the money that time.

He said, "No, no, it doesn't work like that." He said, "You can't not pay me.'

And he just grabbed me by the throat and started assaulting me.

He said, "You're going to have to learn, when I tell you you pay me, you pay me."

And, er, my immediate thought was fear, terrible fear.

He beat me about my head and, er, he took the money that I had.

And he went to his car and drove off.

Andrew was desperate to repay the loan as fast as possible,

and decided to get hold of the money he needed

by taking out a log-book loan against the value of his car.

I thought it's better to owe those people than to owe the guy who had attacked me.

I needed to get him out of my head because it was... it was making me a nervous wreck.

So Andrew took a log-book loan

and told the man he was going to pay off the debt in full.

But he didn't expect what was about to happen.

Still to come, we'll hear how Andrew was forced to flee his home

after the loan sharks turned really nasty.

They pulled me out of the car onto the floor and they started kicking me.

And how bank charges nearly caused this pensioner to lose his house.

And I can't tell you what that was like. It felt dreadful. Sorry.

The payday-loan business is booming.

In the last three years, the amount of money borrowed more than doubled

from 900 million to two billion.

Vacant high-street shops are filling up with lenders -

in a single year the Money Shop opened 80 new branches.

We sent a researcher, Alice, down the high street

to find out what people are told when they ask about a loan.

This is a fairly ordinary South London high street,

it's not a particularly wealthy area,

and there's lots of different shops targeting the kind of people who would use payday loans.

I'm going to ask to borrow £200, saying that I'm on a part-time salary and uncertain income.

And if they ask I'm going to say I had problems with debt in the past.

Alice didn't formerly apply for any loans

and didn't complete any of the paperwork required by the lenders.

However, she got an idea of what they might be willing to offer.

The first shop Alice visited was Speedy Cash.

Typically a £200 loan for 30 days from here

will cost £50 in interest and fees.

I've just been in and they didn't really ask any questions,

they seemed very ready to give me whatever money I wanted.

Speedy Cash told Alice,

if she couldn't pay back the entire loan come payday, she could just pay back the £50 interest

and roll the original debt over to the next month.

On that they'd charge me another £50 so then I'd owe £100 for my £200 credit.

They said I could do this up to four times, by which time you're paying back double what you've borrowed.

The second shop was pawnbroker Albemarle Bond.

They charge a lower fee of £28 to borrow £200 for 30 days.

I needed to show that I was earning £700, but only last month.

I didn't need to prove that I had a regular income of £700.

And they offered to lend me £300 the first time and then £700 the following time,

even though she knew that that was my entire monthly income.

Next on the high street is another pawnbroker, H&T.

They were the cheapest, charging £26 to borrow £200 for 30 days.

They said that they don't really do credit checks as such.

They'll have a little look at your bank statement but that's as far as their credit check goes,

so there wasn't that much of an effort to make sure that I could theoretically repay.

The next shop is the Money Shop, the UK's largest chain

of high-street cash lenders, with over 420 stores nationwide.

The man in the Money Shop just told me that he's never seen a payday loan application be refused,

no matter how bad the credit check was, which might explain why they're so popular.

The Money shop wanted to charge £50 interest on a £200 loan,

which works out to over 1,400% APR.

Together with Speedy Cash, that makes the Money Shop

the joint most expensive place Alice visited,

and 73 times more expensive than the average credit-card APR of around 19%.

You're allowed to roll over...he said a few times, he didn't really give a specific limit.

They seemed fine with you borrowing large amounts of money.

To be honest, the thing that I found the most shocking was that

they've never turned anyone down for credit, cos that really does imply

that they're not looking very hard at whether people can repay the amounts or not.

We asked the companies to comment. Albemarle Bond told us...

The Money Shop told us...

Speedy Cash and H&T did not respond.

Ultimately payday-loan companies are working in the interests

of their shareholders. They want to make as much money as possible

and the best way to do that is to get people to continue taking out more credit each month.

Unfortunately that's not what is in the best interest of the customers.

The rise of the industry has led to a sharp increase in people

seeking professional debt advice after taking out payday loans.

In fact, in a recent survey almost half the payday-loan users questioned

said they thought it had actually made their financial situation worse.

At one branch of the Citizens Advice Bureau they've been so swamped

they've started a campaign to get the industry shut down.

I think it's about time that we show the payday-loan lenders in Medway

that we mean business, and we have to do something about the situation,

with over £2.5 million of debt coming through this building each week.

Today staff from Medway CAB are demonstrating

outside their local Money Shop.

ALL CHANT: Say no to payday loans. Say no to payday loans.

It's generated quite a lot of media attention.

How does this shop and others like it contribute to the problem?

I think it's clear, with the likes of Money Shop, if they've got four stores in Medway alone,

they don't open a store if it's not going to make any money.

This is the tip of the iceberg. There's more and more on television,

Wonga and all the other companies, that are charging up to 4,000%.

People don't read the print, and that's what we're doing today.

Once you sign the contract you're chained into it, tied up into it, and there's no getting out.

Concerns about payday loans have become so great

that they've been banned or interest rates capped in 15 US states

as well as parts of Australia and Canada.

But consumer group Which doesn't want to see payday loans outlawed in this country.

The reality is that there are people

that are going to want credit

and if we don't have a regulated industry

then we're going to have a black market where it's illegal loan sharks dealing with these people

and that's what we don't want.

Coming up later, alongside the rise on the high street,

payday lending is also exploding on the internet.

We'll see what happens when you go online to borrow cash.

You can get into a lot of trouble without anybody knowing about it.

Andrew borrowed £1,000 from a loan shark.

After the man assaulted him for missing a repayment,

Andrew raised the money to pay the man off.

But when he tried to hand over the cash,

he discovered he was in far deeper trouble than he could possibly have imagined.

We arranged to meet on an industrial estate where it was dark.

And he pulled up alongside and got in my car and I gave him the £1,400.

"Well done, good, good, good. So £150 next week, then."

I said, "Well, £150 is not due next week."

I said, "You've had double, which is what you asked for."

And he said, "No, no, no. I've told you, it doubles up.

"You owe me £4,000."

Where Andrew had thought it was just the repayment amount that would double if he missed a week,

it turned out that it was actually the entire loan.

A couple of guys got out the car and came over.

They pulled me out of the car, onto the floor, and they started kicking me.

They kicked and kicked and kicked.

I didn't know whether I was going to get out of that.

Because they didn't stop kicking.

I knew that I'd been hurt and I thought, "I hope I can go to work."

HE BREATHES DEEPLY

Andrew suffered severe bruising and cracked ribs,

but he was too scared to report the attack to the police.

And the intimidation didn't end there.

I come out one morning and all four tyres had been slashed,

and there was a beer mat under the wiper blade

with the words "you will pay" scratched into the beer mat.

And I thought, just get away from the house. So I fled.

A friend helped Andrew replace his tyres

and he decided to go and live in his car.

I slept in the car, ate in the car, my free time was spent in the car.

Eventually, in desperation, Andrew plucked up the courage

to confide in a friend, who agreed to give him a place to stay.

He changed his phone number and his car

and hasn't heard from the loan shark since.

But he still lives in fear of being found.

I'm afraid to go out, I still feel very threatened.

You become afraid to visit family or return home

because you never know who's watching.

Andrew still feels the long-term effects of his experience.

I did visit the doctor on one occasion and I said, "I think I'm having a nervous breakdown"

and he said, "You're not HAVING." He said, "You've HAD a nervous breakdown."

And...

you still feel it. I still feel it now and it's years later.

Lending me £1,000 didn't do me a favour at all.

Most of us might think that the bank is the place to go

for a solution to a financial problem.

But what do you do when it's your bank that caused the problem in the first place?

It's a question that's facing Howard Rutherford.

For the last five years he's been struggling with an appalling deal

that's seen him fending off bailiffs,

standing up in court and even having to sell his home.

And the source of his worst deal?

His bank, HSBC.

I feel cheated, I feel misled,

I just feel very, very let down by a bank that I'd been with since I was 17.

The problems started back in 2001, when a direct debit of £76

was taken from Howard's account to pay his council tax.

At the time, he had an overdraft, but as a disabled pensioner on a low income

money was tight and he was already up to the limit.

That direct debit was returned by the bank,

and for returning it it did two things, it put me

over my overdraft limit and the bank charged me £27.50 for the privilege.

£27.50 was the beginning of a growing stack of charges

that mounted to over £4,500 and almost cost him his home.

My pension was going into the bank, and there'd be a charge perhaps

because I'd gone over my overdraft limit.

And, as soon as my pension went in, the bank were taking a chunk of that out. So I was having less to use.

Then perhaps the next month there'd be another charge, and another chunk taken out by the bank.

As his finances became more strained,

Howard started falling behind on his mortgage payments,

which were paid by direct debit through his HSBC account.

The bank would simply return the direct debit without telling me that it had happened.

And the building society would also then decide they were going to charge me a fee.

Howard's mortgage debt grew to nearly £10,000 in arrears and charges

and the building society began repossession proceedings.

We did get to the stage finally where the order for possession had been granted

and the bailiffs were then instructed to apply for immediate possession.

I managed to get the hearing in front of the judge the morning of the possession.

I can't tell you how I felt that particular day

because I was just literally... about for someone to come along

and say, "I'll take your keys, thank you very much," and throw me out the door.

At the 11th hour Howard managed to get the possession order rejected.

I came within a gnat's whisker of someone coming along

and taking the keys off me and saying, "That's it, you're out."

And I can't tell you what that was like. It felt dreadful. Sorry.

It did.

Still does. Excuse me.

Struggling to make ends meet, Howard looked around for a solution,

and found one.

Or so he thought.

I'd seen in the newspapers and on the television that people were

reclaiming their bank charges and I thought, "Well, I've had quite a few bank charges over the years,

"I think I'll have a go as well."

Bank charges - where the bank adds on a fee for going overdrawn or for a missed payment -

have been around for years.

Estimates from a few years ago suggested banks were making as much

as £4.7 billion a year from fees of up to £39 for a bounced cheque.

But in 2006 a campaign began to get these charges reduced or refunded

on the grounds that they were unfair.

Customers who threatened court action started to win back hundreds of pounds.

The banks were too afraid to test the cases in court in case they lost.

They just paid out to anyone who complained.

In the first half of 2007 alone, the banks repaid £200m in charges.

I got hold of my bank statements, a huge pile of them,

six years, as you can probably imagine, went through them piece by piece

and built up a picture of how much I'd been charged over those six years.

What Howard discovered was that he'd been charged a massive 89 times,

amounting to over £4,500 in charges and interest on the charges.

There were charges for returned direct debits, there were charges for returned cheques,

there were charges for returned standing orders,

there were interest charges of course, which were added to those,

and when I looked at all of this I was absolutely horrified.

Howard filed his claim, hoping for a quick resolution.

When that didn't happen he turned to solicitor Tom Brennan for help.

-Hello, Tom.

-Hello, Howard.

-Come in.

'My initial reaction was that it's a desperate situation'

for a person who has no control over their money because so much of it is being taken away.

-Have a seat.

-Thanks.

Now, which document is this?

What I've done is I've sat down and made a breakdown of how the charges were actually applied.

These three fees, which amount to £260...

Those are all on the same day, aren't they?

But then you start to look at the whole month itself and go back,

and prior to that there was £180 on top of £260,

so I was probably saying goodbye to half of my income.

-So half of your money's disappearing just on this.

-Just in charges.

Tom took Howard's case to the small claims court

to try to get his £4,500 back from HSBC.

But before they could get a result, everything changed.

The Office of Fair Trading decided to take the banks to court

in a test case to see if the charges were fair.

In the small claims court the judge put a stay on Howard's case

while the issue was decided.

'What that meant for Howard is that he had no way of getting his money back'

and this case between the OFT and the banks dragged on for two years. And so Howard was trapped in limbo.

The legal controversy over bank charges came to an end in 2009.

The courts decided bank charges could not be judged unfair on their own

because they were part of an overall package of services provided by the banks.

We think bank charges are grossly unfair because the poorest or those who make mistakes pay the most.

The second reason is the cost to the banks for providing this money

is a fraction of what they charge consumers at the end of the day.

After the ruling the banks did bow to the pressure

and reduced their headline charges.

But millions of people every year are still hit with penalties

they can't afford.

The only way you'll find out whether they've really reduced it significantly

is by looking at the total amount they're taking off consumers.

In 2006 they took off £2.6 billion.

And here we are five years later

and they're still taking over £2 billion per year.

Shockingly, the amount banks charge for unauthorised overdrafts

can equate to interest rates of hundreds of thousands of per cent.

At the time we did our research,

going £100 into the red unauthorised for a month with Barclays cost £88 -

an APR of 366,000%.

While borrowing the same amount for 30 days without permission from Santander

would set you back £100 - that's over 800,000% APR.

In response to complaints, the banks are planning to introduce

new measures later this year - such as texting customers when their balances are low -

to help them avoid bank charges.

We think it's a step in the right direction

but these charges can still accrue up to hundreds of pounds

and we think they're still too high and still too confusing and still unfair.

At the end of 2011, Howard finally received news

that, in a court hearing he didn't even know was happening,

a judge had thrown his case out.

He's planning to appeal.

We asked HSBC to comment. They told us:

I was hurt, annoyed, angry.

Perhaps my gran was right,

keeping it in a tin under the bed might be the answer.

Payday loans are big business in the UK.

Between 2006 and 2009 the number of loans taken out

quadrupled from 1.2 million to over four million.

Many of those loans were taken out online.

So just how easy is it to get hold of cash on the internet?

Researcher Alice went surfing to find out.

I've just done a search for payday loans online and there are 252 million results that have come back.

These slider systems that are on a lot of these websites

make it seem very easy, like all the cash is right there.

Going online is the most expensive way to get a payday loan.

Borrowing £200 over the internet for 30 days could cost up to £66 in interest and fees,

compared with a maximum of £50 on the high street.

It's all about fast cash, easy cash, anonymous cash, right now.

The fact that they tell you you can have it in your bank within an hour,

that's like a lifeline to a desperate borrower.

It may seem like an easy deal, but borrowing online

might have hidden dangers, as Joe Maloney discovered when he borrowed £150 from a company called Mr Lender

to pay for some repairs on his car.

A friend of mine told me there's these payday loan things on the internet

so I went onto the internet and Mr Lender come up and within an hour I had the money in my bank.

It was so easy that Joe soon took out several more loans -

and then found he couldn't pay the money back.

I lost my job so I couldn't pay them back anyway.

When Mr Lender couldn't get hold of Joe at his old workplace

they did something usually saved for naughty schoolboys - they called his mum.

I first became aware that Joe had taken out this payday loan

when I kept getting phone calls asking for the money.

Mr Lender told Sue that the interest on Joe's loan was going up and up

but they promised to freeze it if she could just make a small payment.

I did say to them, "Look, I'm on a pension,

"there is no way I've even got the amount of money you're looking for."

Sue agreed make a one-off payment of £10

and gave her debit-card details over the phone.

She thought that would be the end of the matter -

but a week later, her mortgage payment bounced.

I got in touch with the bank, and I realised that there were

various debits to this company Mr Lender.

They'd taken the £10, as I'd agreed,

and then they'd taken three further amounts.

In total Mr Lender withdrew £310 from Sue's account

on top of the £10 she says she had agreed to.

It seemed that rather than just make the one-off payment Sue thought she had consented to,

she had unwittingly agreed to more.

We asked Mr Lender to comment. Mr Lender say...

Other customers of different payday-loan companies have found

that they have signed up to continuous payment authorities.

CPAs allow a company to take out money whenever they want.

So for example, if they want to take out £400 the first day

and you've only got £300 in your account, they'll take that £300,

then the next day they might come back for the £100 you still owe.

Under a direct debit that's not possible,

the company can only get money out the one time on the one day a month,

so customers have a lot more security with direct debits than with continuous payments.

Consumer Focus carried out research into continuous payment authorities

and found many customers had no idea that's what they were agreeing to.

And in 2010 the OFT banned one payday-loan company from using CPAs

after it repeatedly took money from customers' accounts

when they were already in difficulties.

We don't think payday loan companies are making clear to customers when they sign up

what actually is a continuous payment authority.

Many consumers think it's the same as a direct debit.

The way payday-loan companies are using this is totally unfair.

They're taking money out any day of the month

and taking out so much that at times the consumer doesn't have enough to live on.

Payday loans should always be the last resort.

If you've got to the point where you can't get to the end of the month

and you need to go to a payday-loan lender to tide yourself over until your next pay cheque,

you're clearly running very close to the limit of your financial capability

and you can't do that month after month.

Payday loans are absolutely dreadful.

You know, I would worry about giving anybody a payday loan.

Subtitles by Red Bee Media Ltd