Andrew Walker, who is the regional chairman of R3, the insolvency trade body, said many consumers would avoid debt altogether if they received lessons in financial management.
Research carried out by R3 suggests that 3.5m Britons are considering taking out a payday loan – a short-term loan with high interest rates – over the next six months.
Around 60 per cent of those questioned who had taken out a payday loan said they regretted it, according to R3’s survey.
Mr Walker said: “R3’s research shows that eight per cent of people in Yorkshire and the Humber said they are likely to seek a payday or other short-term, high interest loan. Payday loan companies are regulated by the OFT and they must have a consumer credit license to operate. As far as we know, the OFT do not collect figures, or at least they don’t publish them, in terms of how many loans are taken out per year, the value of these loans and the number rolled over.
“We suggest that the OFT should collect figures on the payday loan sector and publish these figures.”
Peter Heckingbottom, the deputy managing director of Pearson Jones, the Leeds-based wealth management company, said regulations were needed to stop borrowers becoming over-exposed to debt. Mr Heckingbottom said payday loans “have a place in financial planning”.
He added: “Interest on payday loans is high but, in monetary terms, this is not excessive provided the loans are taken for a short time. The problem with this market is that it attracts hard-core borrowing where loans roll-over for longer periods of time and, when this happens, borrowers are exposed to the reality of Annual Percentage Rate (APR) – interest rates of hundreds, or even thousands, of per cent and, at this rate, debt can escalate at frightening rates.”
The Consumer Finance Association (CFA), which represents payday loan companies, challenged the “gloomy” picture painted by R3’s research.
John Lamidey, chief executive of the CFA, said: “Our own independent research, and that of our members, has shown that 94 per cent of payday customers are satisfied with the service and more than nine out of ten customers of a CFA member said they had never felt they were being pressured by staff to extend existing loans.”
The CFA believes that a payday loan is the “ideal product” for consumers who are looking to borrow small sums of money for a short time. Mr Lamidey said the research indicated that mortgages and credit cards were the “real problem areas” for consumers.
A spokesman for the Department of Business, Innovation and Skills said: “We know there are real concerns about payday lending and some of the practices that appear to blight this market.
“Payday lending is a key area of regulatory focus for the OFT, which monitors the market for evidence of consumer detriment. As the market has increased in size, so the OFT has seen an increase in reported consumer harm.
“In light of these concerns, the OFT will be launching a comprehensive compliance review of its Irresponsible Lending Guidance in the new year, which will cover the payday lending market.
“The review will focus on identifying practices that harm consumers, and the findings will be used to take further enforcement action and improve standards in the market.”