Pay day loans have become increasingly popular over the course of the past couple of years or so, as an alternative to traditional high street bank loans, largely due to the cautious lending approach of most banks, which has restricted many borrowers from taking a cheap loan from them.

Despite their popularity, pay day loans have rarely been very far from the headlines, particularly due to the high rates of interest which are often charged on this type of loan and the potential for unmanageable loan debt caused by “rolling over” existing loans into new pay day loan agreements.

There have been many calls from consumer charities for the government to introduce legislation and to place a cap on the number of times a pay day loan can be rolled over and although the government have not introduced any such regulation, one trade body has introduced its own code of conduct for pay day loans.

The Finance and Leasing Association (FLA) has now introduced a new code of conduct for its members, which limits the number of pay day loan roll overs to a maximum of three.

The UK’s largest pay day loan company, Wonga, has signed up to the new code of conduct from the FLA, which comes into effect on Wednesday this week. However, Wonga are the only pay day loan company which is a member of the FLA and therefore no other pay day loan companies are likely to take on board the new code of conduct at the moment.

Despite this, the Office of Fair Trading (OFT) and the Department for Business Innovation and Skills are both investigating the practices of short term loan companies and may well introduce legislation in the near future which forces other pay day loan companies to adopt a similar approach to Wonga.

Since the credit crunch it has become much harder for anyone to obtain the loan they require, but for those with adverse credit who need a bad credit loan, it can sometimes seem almost impossible.

Those borrowers who are seeking advice and want to get the best deal they can on a new loan, often use the services of a financial adviser or a loan broker, who has access to a much wider range of the loan market, including lenders and loan deals which may not be available to the public directly.

But new regulation which is being introduced within the loan industry, particularly for home owner loans under the Mortgage Market Review (MMR), cold make it more difficult for even loan brokers and advisers to find a suitable bad credit loan for their clients.

A new survey amongst loan brokers and advisers found that 53 per cent of them said that they did not place a single bad credit loan case with a lender over the course of last year, whilst a further 30 per cent said that they were able to only place around 25 per cent of bad credit loan cases.

12 per cent of loan brokers said that they were able to place 75 per cent of their adverse credit loan cases and only 3 per cent said they did not have a problem placing bad credit loans for clients.

One Independent Financial Adviser said “I’m surprised that more loan brokers aren’t having difficulty placing cases for people with imperfect credit records. It’s bad enough trying to get a loan approved for somebody who has got no adverse credit, let alone someone who has.”

“On the back of these results, I would be encouraged to think that there is hope for these types of borrowers. But I can’t imagine that the levels of adverse credit that we’re talking about here would be anything major like bankruptcies and countless CCJ’s”

The majority of areas within the financial service industry are now regulated by the Financial Services Authority (FSA), which ensures that consumers get the level of protection and the right advice on the financial products they buy.

Whilst products such as investments, protection, pension and home owner loan and mortgage products are all regulated by the FSA, one area which is outside this regulatory regime is that of consumer credit, which includes unsecured loans, credit cards and overdrafts.

Unsecured loans and other consumer credit areas are currently regulated under the consumer credit act, by the Office of Fair Trading (OFT), which does not offer the same level of consumer protection and advice, as other financial products which come under full FSA regulation.

The latest financial services bill is to be enacted shortly and this will see the end of the FSA, which is to be replaced by the Financial Conduct Authority (FCA) and the Financial Services Consumer Panel has proposed that unsecured loans and other consumer credit areas should be fully regulated by the new authority, once it comes into force.

Although the panel believes that unsecured loan and consumer credit regulation should be transferred to the FCA as soon as possible, they have also said that preserving the existing protection arrangements for consumer credit must be the over riding priority for the personal loan industry.

It is hoped that the plans will enhance consumer protection for those taking out personal loans and overdrafts, but new regulation could also make it harder for some individuals to get the loan they require and others may be excluded completely.

Adam Phillips of the Consumer panel said “The panel is calling for a common sense reform that will enhance consumer protection. Transferring the Consumer Credit Act powers to the FCA will make retail financial services regulation work in the way that most people expect.”

With the UK suffering a bad year economically last year and the prospects of a second recession looming in the very near future, unemployment figures are increasing at an alarming rate, leaving many individuals in danger of falling behind with their personal loan and other debt repayments.

The unemployment rate in the UK has increased from 8.3 per cent to 8.4 per cent, which is the highest level since 1996, according to the Office of National Statistics (ONS).The total unemployment figure in the UK now stands at 2.685 million people, an increase of 18,000 over the course of the three months to November last year.

With personal debt levels on things like unsecured loans and credit cards at an all time high, many people who are currently unemployed, or face the prospect of losing their job, will be unable to manage their loan repayments on a regular basis, as many are already struggling to stay on top of their loan debts even with a full salary coming in.

Those people who took out some form of loan protection in the event of unemployment, could have their loan repayments covered for a limited period, but many borrowers have simply not bothered taking out this type of cover, either due to the recent bad press surrounding such policies, or on the grounds of keeping their loan costs as low as possible.

This is a particular problem for young people between the ages of 16 and 24, as almost a quarter of this group are unemployed, whilst this same group has some of the highest loan and credit card debt across all age groups, based on a percentage of earnings.

For those facing unemployment and problems with their personal loans and other debts, it is important to seek professional help and advice as soon as possible in order to try and avoid serious loan arrears and a bad credit rating.

According to predictions from financial experts, the economic outlook for the UK is pretty bleak for at least the next twelve months, with high inflation, rising unemployment, high utility bills and high levels of personal debt on things like unsecured loans and credit cards.

A new survey, conducted by the Resolution Foundation, has shown that somewhere in the region of one third of the UK population intend to cut back on their spending over the course of this year, as almost a quarter of us expect our personal financial situation to get worse as the year progresses.

Back in October last year, a similar survey found that around 19 per cent were planning serious cut backs on their regular expenditure, however this figure has now increased to 32 per cent, as the gloomy financial outlook and post Christmas blues are forcing people to take stock of their finances and loan debts.

In the October survey, around 12 per cent of people said that repaying their personal loan and credit card debt was a priority for them. However this figure has now increased to 17 per cent of people who are reducing their credit card bills and overpaying on their loans.

At the same time, the number of people who are putting savings away on a regular basis to provide themselves with an emergency fund, has increased from 22 per cent back in October to 30 per cent now.

Gavin Kelly of the Resolution Foundation said “Families that are already hard pressed are preparing for yet another very tough year ahead, with a big rise in the numbers planning to cut back on spending as well as trying to save and reduce their loan debts.”

“Given this gloomy backdrop it’s a real worry that a new round of cuts to tax credits planned for April will further dampen the spending power of low to middle income families.”