There has been a dramatic rise in the number of people in Bradford who have got into a vicious circle of debt through payday loans, it has been revealed.

The local picture emerged as the Government started a review into the actions of payday lenders, who can charge up to 4,000 per cent interest.

It is understood that, out of those in debt locally a year ago, up to ten per cent had payday loans. That figure has now gone up to an estimated 50 per cent.

Alex Bohdanowicz, the specialist services manager at Bradford Citizens Advice Bureau, said that they were seeing ever-increasing numbers of desperate people burdened by huge amounts of debt, with lenders taking direct amounts out of their bank each month.

That meant people had to borrow more and more from payday lenders, such as Wonga.com, to keep their heads above water.

The news comes as the Office of Fair Trading (OFT) said that it was launching a review of payday lenders after concerns that some may be taking advantage of people in financial difficulty.

In the past two years, nationally, debt issues have rocketed by 68 per cent.

In 2008-09, 1,354,204 debt issues were reported to Citizens Advice Bureaus across the UK, compared to 2,274,067 in 2010/11.

Miss Bohdanowicz welcomed the review and urged people to get in touch with the OFT with their stories.

“I welcome the review into irresponsible lending,” she said. “It is quite clear there is a massive increase in payday lending and the impact it is having is quite significant.

“People are telling us they are getting these loans because they haven’t got enough money to reach the end of the month. This lending is not for a holiday.

“That money is for paying essential bills, but lenders expect it to be repaid direct out of your income and it comes out at the end of the month.

“That causes further problems and creates a cycle of payday lending. We are seeing people, not with one, but four, or five or six loans. There has been a significant rise in these loans from just a year ago.

“These concerns have been raised throughout the country. The question is whether we should be promoting payday lenders or more tightly regulating them.”

Evidence gained from the OFT review will be used to boost standards across the sector and to drive out companies that are not fit to hold consumer credit licences.

They will focus on issues of concern such as giving loans without first checking adequately that the borrower can afford to repay them, targeting particular groups of people with unsuitable or unaffordable credit, rolling over loans so that charges escalate and the loans become unaffordable and not treating borrowers that get into financial difficulty fairly.

David Fisher, OFT director of consumer credit, said: “We are concerned that some payday lenders are taking advantage of those in financial difficulty.

“This is unacceptable and we will work with the trade bodies to drive up standards but will also not hesitate to take enforcement action, including revoking firms’ licences to operate where necessary.”