The payday loaning industry originated in the US, but the European crisis that is felt and manifested throughout Europe gave it fertile ground for expansion, and so it is now a booming industry in the United Kingdom as well, having grown exponentially and getting itself under the sights of the UK Government.
These loans consist of small amounts of money, the UK average is 300 pounds, that is given to the consumer to be paid on the “payday” or when the customer feels inclined to do so – larger fees apply to longer payment deadlines.
The borrowing of the money is usually done in exchange for a flat fee, usually between £15 or £40 per £100 and these fees are repaid on the day customers get their salaries – and this is why they are called payday loans.
The rates are mostly fix, as said above, but can also be in percentage, ranging from 3% and above – and the longer the customer waits to repay those loans, the higher the fees or interest rates will be.
Now, payday loans have been in the sights of the UK Government because researches point out that people don’t understand that if they fail a couple of payments they will be seriously indebted and payday loan providers don’t understand that they will be unable to charge the unrealistic amount of interest they have put in place, simply because it would require a lot of court sessions and “lawyering”.
Payday loans are becoming increasingly popular as the financial crisis spreads out its wings throughout the European landscape, but those that provide these popular loans now have their own wings clipped as the UK Government issued some recent changes to how this business can be conducted in their borders.
The UK Government found out that payday loans not only have doubled since last year, but they are now paying extortionate rates as well, going well beyond the considered acceptable amount of 4%.
This lead the government to start issuing caps on payday loans’ interest rates, trying to substantially lower them to stop the “loan sharks” form extorting those in need due to the European financial crisis.
This isn’t all though, as the UK Government has prepared a fresh batch of measures that will be launched soon and that will further regulate the way payday loan providers can do business.
We are mainly talking about how payday loan providers can advertise and how they can conduct their practice – and these measures implemented were thought out because the industry is allegedly hurting consumers.
Consumer credit has to be regulated, or else there could be severe economic consequences – at least that’s what the UK Government thinks, so there is a new Financial Conduct Authority (FCA) in the making and waiting to be launched in the month of April of the next year of 2014. How the new document will change the payday loan industry is still unknown though…
The UK Government justifies the changes by stating how unethical the payday loan business practice has been conducted in these last years, making use of the lack of liquidity of the markets to take advantage of those who are struggling to keep their budgets controlled and getting them into contracting additional debt.
Payday loan sharks will be weeded out with the 2014’s policies, and only the ethical will remain, says the Office of Fair Trading (OFT).
The main problem, experts say, is that payday loans are being advertised as a profitable endeavor while they are exactly the opposite. Payday loans were thought out to be helping last resorts for those in need of liquidity in a bad month and not a way to keep money on one’s pocket. As a result of these ad campaigns, people are getting lured to contract plans that aren’t suited to them – and this is something that has to be changed, adds the OFT.
Bottom line, responsible payday loaners have nothing to worry about, but lenders that don’t respect the rules and that act in an unethical matter will suffer legal action – or at least that’s the message the UK Government is sending.
We don’t worry at all with these governmental changes, as we are and always were ethic, realistic and for our customers – but we know a lot of our competitors are unethical and sometimes downright shady, and so we applaud these governmental measures as we know most of these shady payday loan providers will be weeded out from our business community and this will enable those of us that are honest and realistic to thrive and grow, taking customers which would be extorted by those unethical business people.
But, when it comes to contracting a payday loan, it is up to the customer to assess his situation and to really think if a payday loan will help with, or hinder, your life – as we are unable to assess that for you and we make the assumption that you’re responsible and that you’re making an informed decision.
Also, don’t contract payday loans you know you can’t afford. There are many ways to trick the system into getting an approval for your loan, but remember that we filter customers because we care and because we don’t want people to fall down a financial hole they cannot climb out of – so always answer truthfully when responding to our inquiries and you’ll be approved if you have enough financial stability to contract a payday loan.
Summing up, payday loans are an awesome help for those times of need, but they shouldn’t be contracted recklessly. About the UK Government’s measures, we are quite happy that the men in charge noticed how many loan sharks are giving a bad name to our industry and that they will help society to get rid of them, as nobody wants companies to extort the people of the UK when they need money the most.
Ethical payday loan providers, will always stay on business due to the quality and responsibility of business practices.