Should Payday loans be legal?

pink_princess

Why ? They sign the contract ,they go to them .The problem we have is that people go to these companies in the first place .We need to educate school age children how to live within their means .Most people who use these companies try to overspend and live a life they can t afford .When did it become the norm to have a family day out once a week ? Or have new clothes every week .Its just a case of getting back to common sense .

Monkeyballs

Hi guys, keep it coming!

I'm enjoying reading what you have to say.

I agree pretty much with all of the points you are making to one degree or another.

The key question here is this though, while there may be an underlying need to educate the population, probably starting from a young age, what can/should be done with regards to payday lenders?

Just because people get into debt with them it does not mean they should be just left to fend for themselves.

If there was closer regulation then it would be possible to repay the money at a sensible rate, over a set period of time. At the moment it seems to be too easy for the lenders to walk all over their customers.

I can see no reason for not making it standard practice for:

A - Maximum of 15% of total (proven) income to be lent out.

B - Reply to customers emails within 3 working days.

C - Have a maximum loan extension period of 3 months before either demanding payment or, agreeing a repayment schedule of between 3 - 6 months max at a sensible rate of interest.

D - Have a Payday lenders 'register' where customer details are recorded to avoid a customer abusing the system and lending from multiple lenders.

Ok, I realise that D is a bit tricky... But surely not impossible?

PNPSUKNET

Suppose they could say that about vanquis credit card or provident loans.

Monkeyballs

No question that people should only borrow money they can afford to pay back but what about when things get out of hand?

Vanquis are reasonably approachable and if you do encounter financial difficulty offer repayment plans and are willing to make short term arrangments if need be, as do Provident.

From what I see in the forums, the only way to handle companies like Wonga when you start to struggle are to cancel your cards, change banks, contact CBA, etc... why should you need to do these things? While I accept the need for sensible borrowing, what about sensible lending?

barbiedoll

Spending beyond our means is a massive problem in the UK, partly fuelled by the media encouraging everyone to aspire to a lifestyle they cannot afford. The banks need to take their share of the blame, as do the estate agents. We're all told that interest rates are low, our houses are worth a fortune and we should all be sunning ourselves in the Med twice a year, changing our car before the petrol tank runs dry and spending the equity in our homes on extensions, new kitchens and cosmetic surgery. Many people, especially the youngsters, are in debt because they are trying to keep up with the glamourous lifestyle of the so-called celebrities. Girls think that a designer handbag and a £600 set of hair extensions is the route to happiness. And lets not forget the students who leave university with thousands of pounds worth of debt. Payday loans and other short-term lending fuel the fire for the poor, who are the ones most likely to use the services. People have always borrowed money and used credit, my gran used to use the "tally man" who sold her things and called around weekly for payment. But the whole industry has exploded and now almost everyone owes something to someone. Banks should be much more accessible to poorer people, we know that almost anyone can obtain a basic bank account but the people who desperately need regulated banks are often the ones who know nothing about the services available. Whereas information about Payday loans is everywhere. All school leavers should be made to open a basic bank account and should be educated in the services provided by a bank. Financial education should be compulsory in schools, and it should start at primary school level. And yes, I do think Payday loans should be banned, anyone who lends money at a rate of 2000% apr IS a loan shark!

Monkeyballs

Hi Barbiedoll,

Excellent, thank you!

People see money being flaunted and it has almost become a religion, if you want to be someone then you need to show you have money. It's not cool to be not seen...

So often I see articles in the paper and magazines where the focus is on the COST of something a celebrity is wearing, why do we need to know?

If the option is not there to borrow money then they won't be able to get further into debt.

If a family is struggling to make ends meet then why is the option to take out a high interest loan even available to them?

If you have no money now and every month you run short, how is taking a loan against money from next month going to help when you will be short then too?

I would like to see banks stepping up to help the country and it's population. I understand that it may not make them mega money but c'mon! They are willing to take our money and charge us through the nose in fines and the like... But they are very closely regulated. Payday loan companies aren't.

Hannah_10

I shall reframe that question to ask...

"Is legislation the answer to to the payday loans problem"?

My answer would be...

It's a lot less suitable an answer than proper financial education for the masses. At the moment Payday loans are legal, they display thier terms and conditions as prescribed by the law and they can be seen to be the sharks they are in advance, but people are still choosing to go with them. That's not because the payday loans companies have practiced some form of deception, it's about a lack of financial understanding on the part of the ordinary people of Britain.

I would say the answer is a mass campaign of public education to reach adults and the introduction of financial education in schools. Much like the Change For Life drive to instil a basic nutritional education in the already-adult populace.

ganonman

I agree to all above, not due to legality, simply because the people that use these companies are not the people that would use the in a 'sensible' way.

I considered them this month as my credit rating can't even get a rubbish credit card, and my MOT is due; I simply did not have the funds to cover it and any work that may be necessary for my car.

I changed my mind. I sent my mobile to a mobile recycling company (though a cashback site too) and got a £60 cheque, I found a free place to park 1.5 miles from where I work to save another £60pm. So I've free'd £120 for it, if any extra is needed I'll take it from my shopping and petrol budget by going without things.

I'm not trying to say people are bad for going to these companies, I'm saying that I'd prefer to sell a gadget I love(d); add 20-30mins walking to my commute, and going without any luxuries for this month (and possibly next) just to avoid the 'easy' debt. That's because I believe they are so dodgy, even though on paper it could have been a reasonable route.

Chris_mcneil

I unfortunately have been on the wrong end of a payday loan spiral, but I would still say they should be legal, just with better regulation, more customer service (not as if they can't afford it) and an easier way out if you do get into trouble.

To cut a long story short, I have paid an unnecessary £2000 over 12 months due to being in a spiral, and it wasn't until I had a rant on twitter that the company saw that they gave me the help I needed.

IMO £50 over a week to get a new tyre on your car is fine. £200 for 2 weeks is going to escalate into a problem

Monkeyballs

Ok, it's becoming pretty clear that people seem to be in favour of either:

A - Some form of education being made available to the masses which would teach people how to be financially "mature". But how could this be done? What would the best course of action be? Would it be an introduction in schools and then some kind of compulsory course for everyone who either declares themselves bankrupt or takes an IVA? What are your thoughts?

B - Closer legislation of Payday loan companies. To ensure that some basic foundations are in place such as good, easy to contact customer service dept's, a structured repayment option scheme, borrowing limits.

Keep your thoughts coming, does anyone using this forum work for one of these companies? What are your thoughts? I know if worked for a company like this and read some of the threads on the 'Debt Free Wannabe' forum that I'd have an opinion...