MSE news: The loan firm that charges 2,400% interest

Former_MSE_Guy

This is the discussion thread for the following MSE News Story:

"Indebted consumers are being lured into agreeing loans with annual interest rates of well over 2,000%.

Firms that offer 'payday loans' levy these huge charges on borrowing up to £1,000, and often target those short on cash ..."

Read the full story:
The loan firm that charges 2,400% interest

talana

Hardly news surely?
On this very board there are many discussions about payday loan companies with similar rates.

"Indebted consumers are being lured......

"Lured" suggests something underhand. How exactly are they being lured?

For what its worth, as long as the companies are up-front with their rates and don't try to hide them then I can't really see the problem.
eg if they advertise clearly that they charge 2400%, then the consumer can choose to accept that or go elsewhere.

esmerellda

Or there are crisis and budgeting loans interest free available to people on benefits (max £1500) from the social fund. Easy to apply, repayments taken at source and receive the money within a few days.

Payday loans seem like a good idea at the time, no one ever thinks they will get trapped in the extension spiral, but they do.

I wonder actually if there are surveys about showing for what purpose people take out these payday loans ? I suspect a number are to pay off bailiffs or debt collectors who are causing grief - in which case a bit mroe education of peoples rights and a tad more clamping down on unsavoury practises by DCas wouldnt go amiss.

wizk1

I dislike these companies with a passion, but I rather like PayDayUK, seeing as they offered £60 as Quidco cash back once upon a time, to take out my first (and only) loan. As a result, I managed to screw them out of £40.

Savvy money saver........ 1
Faceless loan shark co... 0

marshallka

Do these firms actually get a CCL to trade in finance and if so where are the regulators that are supposed to protect people like this. I cannot understand how they are allowed to trade myself. It makes me so angry cause this is PURE GREED from total vultures. How anyone can call a 2000% APR fair i will never know. Surely if an agreement is drawn up then FOS can get involved in cases like this as they are allowed to now look into consumer credit taken out from April 2007. I realise that people have choices and anyone actually taking these loans must not be of sound mind at the time if you ask me or very desperate and vulnerable. It just should not be allowed in the first place.

talana

marshallka wrote: »

I realise that people have choices and anyone actually taking these loans must not be of sound mind at the time if you ask me or very desperate and vulnerable. It just should not be allowed in the first place.

Fair enough, I can understand that viewpoint.
But what alternative are you suggesting for those consumers who take out these loans?
If these payday loan companies are prevented from charging high APR (as an aside, what would you consider to be a fair APR for such a loan?), then they'll simply cease trading in the end. Good, you might think!
But where then for a short-term loan for many of these consumers?
The demand will still be there, and the hole will partly be filled by the illegal loan sharks who are even worse.

~Brock~

Usual case of concentrating on the headline without looking at the substance.

The acticle clearly explains why the rates are so high - the loans are for short terms but the rates, by law, are annualised.

Why is this always so difficult to understand?

As for the guy from Barnardos - I find people like that so patronising. Is he saying that 'these' people (who are 'these people' exactly?) should not be allowed to borrow money? Is he offering to lend these 'poor' people his own money instead? No of course he isn't!

You can be sure, however, that these 'poor' people would still need to borrow money even if Dr Barnardo got his own way and had these companies shut down. Trouble is, they would be borrowing from people who don't give a to$$ about the law. Which would you prefer?

marshallka

~Brock~ wrote: »

Usual case of concentrating on the headline without looking at the substance.

The acticle clearly explains why the rates are so high - the loans are for short terms but the rates, by law, are annualised.

Why is this always so difficult to understand?

As for the guy from Barnardos - I find people like that so patronising. Is he saying that 'these' people (who are 'these people' exactly?) should not be allowed to borrow money? Is he offering to lend these 'poor' people his own money instead? No of course he isn't!

You can be sure, however, that these 'poor' people would still need to borrow money even if Dr Barnardo got his own way and had these companies shut down. Trouble is, they would be borrowing from people who don't give a to$$ about the law. Which would you prefer?

Brock I did read the article and still find the APR (short or long term) too much in my eyes. Perhaps i do not understand it properly either. I do however understand what you are saying here.

~Brock~

marshalka I wasn't referring to you love, I was talking about the general journalistic sensationalism that this type of business attracts, when even the OFT themselves have acknowledged in the past that the APR virtually useless in such circumstances.

The CAB made a supercomplaint to the OFT some years ago about short term weekly collected loans, called Debt on our doorstep. One of their biggest gripes was 'excessive APR's' The OFT did their investigation and then the whole thing was eventually referred to the Competition Commission.

It is interesting to note that the resultant solutions included plenty of requirements for lenders to share data with CRA's and make it easier to compare products etc, but NOTHING was done to make them change their interest rates. So, after a two year detailed investigation, during which the OFT and the CC studied carefully the business models of such companies. they did not make any recommendation to lower or cap rates. Does that not tell you something?

PBA

While the average consumer might feel this sort of rate is abhorrent, as a rule lenders price to risk. This kind of lending is inherently a high risk, so the interest rate must be high. I agree wholehartedly with other posters, any suggestion that rates should be capped will only allow sharks to enter the market, who might have far more ruthless methods for collecting payment than any legit company.

michaels

Was thinking of doing this but thought it might look a bit poor on my credit file

wizk1 wrote: »

I dislike these companies with a passion, but I rather like PayDayUK, seeing as they offered £60 as Quidco cash back once upon a time, to take out my first (and only) loan. As a result, I managed to screw them out of £40.

Savvy money saver........ 1
Faceless loan shark co... 0