Has the FCA got the payday loan cap right? Have your say!

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Comments

  • michael1983l
    michael1983l Posts: 1,916 Forumite
    Does this cap apply to those loans being offered by firms like Peachy and Sunny and Pounds2Pocket, where the loan is set out over a longer period, like 6 months but still at ridiculous interest rates. Do they count as a payday loan?
  • CKhalvashi
    CKhalvashi Posts: 12,040
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    This seems very reasonable to me, perhaps too reasonable......
    💙💛 💔
  • Apples2
    Apples2 Posts: 6,442 Forumite
    I'm sure they will already have ideas to combat this.

    Maybe not only do you apply for a loan, you also agree to become a member of the loan service, for £15 per month payable until the debt is cleared.

    At present it is a bit of a game with debts being passed onto DCA (made up names??) adding more fees and charges to a balance the debtor knew never could be repaid in the first place.
    Perhaps this will lead to much quicker CCJ's being issued than the current drawn out affair.
  • Tiny_Tina
    Tiny_Tina Posts: 32 Forumite
    Total cost cap of 100%, which protects borrowers from escalating debts. Borrowers must never have to pay back more in fees and interest than the amount borrowed.

    Will this apply to all forms of loans? Including mortgages?

    I do hope so :beer:
  • Cornucopia
    Cornucopia Posts: 16,139
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    edited 15 July 2014 at 11:18AM
    The wording of the 100% price cap is too vague.

    They need to specify that it covers rolled-up and rolled-over loans, if that is what they intend.
  • Rafter
    Rafter Posts: 3,850
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    I think the cap is important and at 100% of the amount borrowed is easily understood.

    What isn't clear from the announcement is over what period it applies?

    For me, it feels that 12 months/ 1 year is realistic and that it should apply to any form of unsecured borrowing whether loan, credit card, store and caatalogue credit, doorstep loan or overdraft over say a minimum of £100.

    So borrowers could never be charged fees or interest over a 12 month period greater than the amount borrowed.

    As now, charges for late payment or default or modest processing fees for non-electronic payment could be levied on top - but have to be proportionate to the cost for the loan provider and capped as additional protection.

    A great first step though for protecting consumers from themselves and profiteering lenders.

    R.
    Smile :), it makes people wonder what you have been up to.
  • dazleech
    dazleech Posts: 153 Forumite
    Tiny_Tina wrote: »
    Will this apply to all forms of loans? Including mortgages?

    I do hope so :beer:
    I agree, we shouldn't be discriminating against any kind of borrower
  • The FCA says the cost of payday loans and other high-cost short-term credit will fall 'significantly' under its plans ...
    Read the full story:

    Payday loans cap will slash costs, regulator says

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  • Former_MSE_Aileen
    Former_MSE_Aileen Posts: 31 Forumite
    edited 15 July 2014 at 2:38PM
    Hi all

    The cap will only apply to 'high-cost short-term credit'. Under the FCA definition of this, it will not include mortgages or payday loans where the repayment period is greater than 12 months. Their definition of high-cost short-term credit is:

    A regulated credit agreement:

    (a) is a borrower-lender agreement or a P2P agreement;

    (b) in relation to which the APR is equal to or exceeds 100%;

    (c) either:
    (i) in relation to which a financial promotion indicates (by express words or otherwise) that the credit is to be provided for any period up to a maximum of 12 months or otherwise indicates (by express words or otherwise) that the credit is to be provided for a short term; or
    (ii) under which the credit is due to be repaid or substantially repaid within a maximum of 12 months of the date on which the credit is advanced;

    (d) which is not secured by a mortgage, charge or pledge; and

    (e) which is not:
    (i) a credit agreement in relation to which the lender is a community finance organisation; or
    (ii) a home credit loan agreement, a bill of sale loan agreement or a borrower-lender agreement enabling a borrower to overdraw on a current account or arising where the holder of a current account overdraws on the account without a pre-arranged overdraft or exceeds a pre-arranged overdraft limit.
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  • Clive_Woody
    Clive_Woody Posts: 5,848
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    Assume this means that a lot less people will be offered payday loans as the silly APR compensated for the large number who default or never repay so that financial model goes out of the window.

    Expect stricter credit checks for this type of loan and more people with nowhere to turn when they need money and all mainstream lenders have turned them down.

    No doubt the regulator will hail this as a great victory but I would guess that PD lenders cannot afford to lend as widely with these restrictions in place. Can the regulators suggest where people can turn when PD lenders say not interested? Good day for loan sharks of the unregulated kind I think.
    "We act as though comfort and luxury are the chief requirements of life, when all that we need to make us happy is something to be enthusiastic about” – Albert Einstein
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