It is that time of year when many people are counting the cost of post-Christmas celebrations. After the festivities die down, many people are faced with larger than normal bills and debts that add increased pressure to already tight budgets.

For some, this pressure results in them turning to payday lenders in order to quickly pay their debts.

For many, this is a one off fix that is quickly repaid.

For others, this path can lead to a potentially catastrophic situation… At the time of writing, Market-leader Wonga charges loans at an equivalent APR of 5,853%, meaning a £400 loan taken out over 30 days would result in £527.15 having to be repaid a month later.

I have met people who have found themselves in terrible situations as a consequence of these astronomical interest rates. Forced to take out ‘roll-over’ loans in order to pay off previous advances, further compounded by late-payment penalties and additional interest charges, some have found themselves trapped in a spiral of increased borrowing that has led to debts that threaten their homes and very way of life.

The Europe Economics’ analysis of data collected by the Office of Fair Trading indicates that some firms’ business models are actually based on making money from these type of rollovers and default charges.

I believe this type of business approach preys on some of the most vulnerable in our society. I find this type of ‘poverty profiteering’ distasteful and consider it an issue that requires urgent action.

I very much welcome George Osborne’s toughened up regulation of payday lenders which has granted the Financial Conduct Authority powers to cap the overall costs fees and penalty fees from this April, as well as curbing advertising and debt collection techniques.

I would also like to see ‘saturation zones’ declared in order to curb the current growth of money shops in low-income areas that already have a number of these establishments.

Payday lenders have their place, but only alongside other options.

The Welsh Government and local Councils need to do more to facilitate responsible lending by ensuring that people have access to fair, affordable, financial alternatives. We should be supporting the expansion of credit unions and be engaging with banks to encourage the widening of affordable services to residents. When this happens, I suspect we will see payday lenders interest rates decrease even further, due to competition, not just regulation.