Number taking out payday loans 'quadruples'

The number of people taking out expensive payday loans has quadrupled over the last four years, a consumer watchdog has said.

Consumer Focus warned banks needed to offer affordable short-term loans as alternatives, as well as recommending stronger safeguards to protect consumers from spiralling payday loan debts.

In its study - Keeping the Plates Spinning - Consumer Focus estimated the number of people using payday loans has increased four-fold since 2006 to 1.2 million people, borrowing a combined £1.2 billion.

A typical payday loan could cost £20 for every £100 borrowed, meaning a £300 loan would cost £360 if it was repaid after one month.

If the loan was deferred or "rolled over" for six months it could cost as much as £660 to repay the loan in full.