Thousands of people could be going without food, clothes and heating in order to pay back "payday loans", and the number of people taking on the credit has shot up by 50%, according to new research.
Five million British adults said they would consider taking out a payday loan in the next six months, an increase from 3.5million.
R3, the trade body for Insolvency Professionals who conducted the research, said their new research showed the "payday loan can no longer be regarded as a niche form of credit."
Researchers found that one in four young people, aged 18-24, is likely to seek a payday loan, and that 13% of adults pay back their loans and go without food to pay their debts.
Stella Creasy, Labour MP for Walthamstow, is an active campaigner for regulation of payday loan companies. She told the BBC Radio 4 Today programme: "I look at these figures in sorrow more than anger.
"I have been warning the government for two and a half years, that when wages don't cover the cost of living, this is the consequence, people borrowing in this very toxic way, and because of the high interest rates and the way these products are marketed, they are getting themselves into more and more debt.
"These figures are particularly shocking because they show people are choosing to pay back loans rather than feed themselves. They are borrowing for the basics, they are borrowing to feed themselves and get drawn into a spiral.
"The time for self-regulation is more than over, the government really needs to get a grip and back all the measures about capping the cost of credit before this debt tsunami engulfs whole sections of Britain.
Stella Creasy, the MP has been campaigning to clamp down on legal loan sharks
"One of reason I've been campaigning for a total cost cap is to make sure people know the most debt they will ever get into. Lots and lots of people dont realise the extra charges, and because they are borrowing for essentials they cant chose not to do it. That's why self-regulation won't work."
Payday loan companies legally charge interest rates of 4,000% a year, including Wonga and Provident. Since the recession hit, the industry is worth £3.5billion a year.
The MP has begun a campaign to get people to petition the Lords to vote in favour of an amendment to the new Financial Services Bill, which will allow the new regulator to cap what the companies can charge.
R3 Council Member, Louise Brittain said: “If used in the right way, to fill a genuine one-off gap in finances, a payday loan does have a place.
"However they are increasingly being taken on as a debt solution instead of a financial solution.
"We know from last year that one in three couldn’t pay off the first payday loan so had to take out another one – and now 12% of 18-24 year olds have prioritised paying back this debt over buying food in the past six months. This is surely not what the payday providers intended.”
She added: "These loan companies operate glossy websites and even sponsor football teams and are capitalising on a generational shift in attitudes towards saving and debt.
“It seems younger generations will borrow money if they really want something – saving and waiting isn’t common place – many of these people tend not to have the credit rating to call at more traditional establishments, with more comfortable terms, and have therefore resorted to payday loans.”
The research found that 13% of people who owed money had gone without essentials like paying for food or heating, with 7% saying they had specifically gone without food.
The figure is higher amongst younger age groups; 12% of 18-24 year olds and 15% of 25-34 year olds have prioritised paying back a payday loan over buying food in the past six months.
“This is a million miles away from the supposed purpose of payday loans, which providers claim ‘smooth over financial peaks and troughs’. Instead, expensive loans taken with easy internet or smart phone access are forcing some debtors into making difficult choice," Brittain said.
Creasy said the research would spur on her campaign, in a blogpost on her website: "The public know these loans are toxic, but what choice do they have when they’re trying to keep a roof above their heads or pay to get to work?
When the evidence is so clear of the problems now facing millions in our country it is simply inexcusable for the Government to refuse to act."
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