MSE News: Government faces petition to cap payday loan costs

Former_MSE_Helen
Former_MSE_Helen Posts: 2,382 Forumite
edited 27 October 2011 at 4:21PM in Loans
This is the discussion thread for the following MSE News Story:

"An e-petition urging the Government to act on payday loans by Christmas has been launched ..."
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Comments

  • tagq2
    tagq2 Posts: 382 Forumite
    (1) How well are payday loan companies doing on following that new no-repeated-debit-attempts-from-all-payment-methods rule?

    (2) Why aren't more borrowers members of their local credit union? My local asks you a whole bunch of questions about income and expenditure before you get a loan to make sure you're not borrowing irresponsibly, and there are no fines for early or late repayments (excepting collection costs if you stop all contact). If your credit record is so bad that you're being refused by all responsible lenders then you do not want to borrow more, but want to seek debt counselling immediately;

    (3) Why aren't more savers members of their local credit union? Their dividends might not be as great as the best savings accounts, but putting a small propotion of your savings there will help solve the debt problem - and that's going to benefit everyone in the long run, including you.
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    So they lower the headline APR and increase the minimum charges (and then most PDL customers will pay more).

    Politicians are stupid.
  • Merlin139
    Merlin139 Posts: 6,829
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    I know people that have used these companies so that they could go out on the !!!! on a Saturday night. If I ain't got the money I don't go out. A lot of people end up using these companies because they cannot be bothered to budget.

    Just because something is there does not mean people have to use it. People that do use these companies can read what the charges are so they can decide.

    You can lead a horse to water but you cannot make it drink.
    3.795 kWp Solar PV System. Capital of the Wolds

  • Apples2
    Apples2 Posts: 6,442 Forumite
    Merlin139 wrote: »
    You can lead a horse to water but you cannot make it drink.

    But with a typical PDL customer, you can't drag it away from drinking, even when it is full and cannot handle any more water.
  • Sceptic001
    Sceptic001 Posts: 1,111 Forumite
    Have these people never heard of the law of unintended consequences?

    Put the regulated payday loan firms out of business and the loan sharks will be back in droves.
  • Apples2
    Apples2 Posts: 6,442 Forumite
    With a payday loan, if you borrow £100 over 8 days, you could expect to pay around £14 in interest and fees, and this is from some of the cheaper firms.
    How horrific is that...really??
    In addition, there are hefty fees for late repayments which can result in charges that can add up to a large proportion, or even exceed, the amount borrowed.
    There's the problem right there. Tighten the lending criteria, reject most applicants, maybe reject those with a bad credit history completely.

    Good for Credit Unions but let's face it, a significant percentage of PDL borrowers would never save for a rainy day in any case. Credit Unions cannot support nothing but borrowers.
    Baptist Barry & his Baseball Bat will find all his Christmasses coming at once.
  • tagq2
    tagq2 Posts: 382 Forumite
    Sceptic001 wrote: »
    Put the regulated payday loan firms out of business and the loan sharks will be back in droves.
    Is there sound evidence that payday loan companies have reduced loan sharking?

    e.g. As Merlin139 has noted, people may use PDL companies for going out one Saturday when the money in the bank doesn't quite cover enough rounds. Would this sort of person have dreamed of risking a loan shark for that sort of thing?

    For people who really would benefit from a short-term loan of the sort banks don't offer, choosing a loan shark may have been the result of lack of education: did the borrower know about government crisis loans? budgeting loans? credit unions? counselling services? Choosing a PDL instead of an unlicensed lender is just one step up the education ladder (assuming the latter is scarier than the PDL company: is it correct to assume every unlicensed lender is a happy bundle of violent evil?).
  • In my opinion,

    Forcing such a cap will make lenders become less willing to give loans (why take huge risks when the returns are going to be low) to people who are on the borders of high risk, making them go to street based loan sharks.

    Pushing for this petition will have a more bad affect on the borrowers rather than the lending companies themselves.

    Once people start going to loan sharks, there is no regulation that can affect street lenders, who will the petitions target at this stage?
  • dealer_wins
    dealer_wins Posts: 7,334 Forumite
    Abishek wrote: »
    In my opinion,

    Forcing such a cap will make lenders become less willing to give loans (why take huge risks when the returns are going to be low) to people who are on the borders of high risk, making them go to street based loan sharks.

    Pushing for this petition will have a more bad affect on the borrowers rather than the lending companies themselves.

    Once people start going to loan sharks, there is no regulation that can affect street lenders, who will the petitions target at this stage?

    Well said that man. (although payday lenders are scum of course)
  • nomoneytoday
    nomoneytoday Posts: 4,866
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    These companies exist to fill in the gap between High Street lenders (Banks, Building societies etc) and the nasty sharks.

    Taking them away won't drive 90% to prime lenders IMHO but force them towards lenders who won't stop at a few phone calls or direct debits...
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