Should Payday loans be legal?

barbiedoll

It would be easy to educate the "masses" really, (and I include myself among them!) Instead of endless property and antiques programmes on the telly in the morning, why can't the BBC make a regular long-running show about personal finance. (I could think of an ideal presenter not a million miles from here ) I know they have things like "Watchdog" for people who have already had their fingers burnt but why not educate them before disaster strikes? Each programme could concentrate on a different aspect of personal finance, e.g bank accounts, credit cards, tax credits and benefits, credit unions etc etc. It should be repeated in the early evening and could be viewer interactive, with phone calls, emails and viewer stories. As I said before, children should be taught money matters in school, many kids are facing the consequences of their parents attitude to debt, mine included, and again, why not make a tv show for them too? They're never too young to get into the MSE ways!

petrolhead69

I dont think banning them would help much, it would just boost loan sharks business. Peolpe will just keep doing !!!!witted things regardless. Drugs are illegal, and that really helped with getting rid of the problem didn't it. Smoking is the same, costs a fortune and smokers are treated like lepers in a lot of places but it still doesn't discourage people. I think we need more education in the high schools.

I was in a foundation class for geography and still was forced to learn to learn about types of mineral deposit or topographical whatnots, !!!! most people will NEVER ever find any practical use for, but was never once even remotely explained about compound interest and how it works for you when saving and against you when borrowing, how to manage personal finances etc no one should be allowed out into the world without learning the basics on how to manage money and to live on less than you make, and really drum it into people from a young age that money is finite and wasting money on frivilous crap deprives the oppertunity to do something useful with it.

At least with a payday lender you can default and the consequences are minor compared to defaulting to a loan shark.
*edit reading that back it sounds a wee bit condecending and judgemental but let me qualify it from the viewpoint that in the past I have participated in stupidy with credit big time and my viewpoint is tainted with a bit of disgust in myself as to how I could have walked in to something so stupid

415SanFran

I think they should have the same regulations as Credit Union, that way if you do not earn much money then you cannot borrow that much.
My sister is on benefits with three children, she took out a payday loan for a new mobile phone, nothing wrong with the one that she had,,,,,but the new one was pink! (yes you read that right> A load for crap)
Next thing I hear is that she got a fine for not paying her TV licience, I stopped bailing her out a long time ago, she told me she had no food in the house, so I took some round for her, the next week her child was wearing a brand new pair of kicker boots at about 40quid,(this is about 15 years ago) clarks just as good but half the price, but these were "sssssooooo cute" the child was not even walking at the time.
But, I feel that most of the people that use these companies have the same mentality as her, the more savvy people, do it other ways, like taking food to work, using approved foods, walking to save on bus fairs, in other words roughing it for a month or two rather than getting more debt.

Monkeyballs

Hi guys,

Very good points being put forward. I especially like Barbiedolls idea of a TV programme (BBC using licence payers money for something useful I hear you ask?). This could well have a 'live' element to it and have viewers calling in to ask for advice on their situation... There have been a couple of shows like this in the past but oddly nothing much over the past 5 years or so (From what I can remember) which is especially confusing considering the amount of debt the country is in...

Good points made re. increase in people using loan sharks etc... and regulations in line with Credit Unions.

Obviously if anything did make it to legislation it would have to be after careful consideration of the consequences. No easy fix I'm sure you'll agree but I feel it is necessary.

More suggestions?

CLAPTON

how much damage do payday loans actually do?

do they e.g. do more or less damage than the aggregate damage caused by car loans for young people who get that 'must have car'; ok the rates for the car loans are quite modest say 'only' 20% but people are borrowing 12-15k at these rates

are payday loans the problem or is it the prople who simply don't understand that you SAVE first and then spend and not the other way round

reading this board I would say that for all the people in financial trouble, payday loans cause a relatively small proportion

so maybe payday loans are the wrong target

if the payday rates were lower, wouldn't people just borrow more and in the end we would have the same result

Monkeyballs

Hi Clapton,

You make some very good points. But, consider this.

These loan companies are, in the grand scheme of things only offering small amounts of money but the impact and stress caused to someone using their services can be so much more! I often read advice being given to people who are struggling which is to close their account? The first port of call in any situation where you are starting to struggle should be to the lender and their customer service team...

The stress that these badly managed companies puts on people simply serves to compound the matter further.

While I can accept there is a need for companies like these I feel that the companies should be more ameniable to their customers. Obviously not to the point of being soft on them but they need to better understand the people they are lending to.

DarkConvict

I think my comments have already been voiced in her already, but here i go anyway

The companies do advertise their rates, they do provide a service, and they do so without the remit of the law.

The real problem is the way the users of the service actually use it. The question they never ask is if I can't afford £100 this month why would I be able to afford £110 next month. Failure to repay is where the issue really crops up, as the new loan arrangement fee and other higher fees and interest all creep in. Unlike credit cards and min payments the debt spiral of payday loans starts at the first failed repayment which is what screws up so many people as there is no chance to stop it once it has started.

I agree its done out of desperation in many cases, but so much of it is not down to circumstances but poor financial planning. Regulations would probably help but regulations also brought about the warnings "This bag of cashew nuts may contains traces of nuts" and the more recent "Do not put animals in the microwave". Some regulations only seem to serve to help those who just cannot be helped even with them.

The forefront for the attack on stopping the use of payday loans does not need to be the companies but our children in better financial planning in the school. Sure, you can steer clear some people from payday loans but most people you cannot, they cannot realise the error in taking them out until they feel the affect of it, and bloody hell it gives one heck of a kick when you realise.
Like with all debt, its easy to talk about the experience of it, but you will not understand the constant day to day worries until your in the position. The people best equipment to fight and regulate payday loans are actually those that are the least likely to take them out.

Monkeyballs

Hi DC,

You have commented before but as ever, yours are words of wisdom.

But the simple fact is, people out there ARE using these companies and their products already.

Educating people is undoubtably the way forward but what about those people who are already in trouble? Is it right that they should have so few options available to them once they get into trouble?

Introducing regulations may include things like "getting into debt will likely induce stress" but these are not the kind of things I'm talking about here.

I think that if a company is going to go about lending money then it needs to be willing to take the responsibility of looking after it's customers when things go wrong.

If banks offered payday loans and the rates they offered were sky high and when the customer got into trouble then all hell would be let loose on them as they need to be seen to be "fair" but a payday loan company doesn't seem to have to?

Perhaps it's the poor visibility of these companies? As they are only really advertised online (with the exception of the Wonga ad's on TV) not so many people know about them and the people who tend to use them are the people who are most at risk, be this due to lack of financial planning, education, etc...

It's almost like they are the financial worlds seedy underbelly and don't advertise on prime time TV as they'd rather keep a low profile...

Monkeyballs

*** I should add my last comment is more to get conversation flowing than being my actual opinion ***

(Although it's not a million miles off...)

DarkConvict

heh, my post does sound more like I'm preaching :P

I agree, my post makes it sounds like its a lost cause for those already in trouble or heading towards it. And I would back that up as been my opinion given the speed at which payday loans suck people down. There is no protection at this point, but the same applies to defaulting on even a normal loan. Its goes to collections department and then it becomes a matter or debt collection tactics, unmoral, unethical, but hey they work so why would they stop doing it. Single people already depressed by debt, make easy targets and they are unlikely to win a fight against a big company although one man did defeat Lowell, but it wasn't his debt so its a slightly different matter.
The only way out is to pay the loan off in full, but given you couldn't afford the original payments the chances of that happening are just negligible.

There is however a opinion that i am somewhat hesitant to post but here it goes. If regulations are in place to make getting out of debt easy, its no different to a family member to keep on bailing them out. Simply put they will not learn, *now the hesitant bit* been in debt and getting out of it does need to be a challenge, it should not be easy. The long haul DFW's will tell you this, the experience of been in their place is not one you want to repeat, and you will try damn hard to avoid it in the future. I've seen someone go BR 3 times, and they managed to get away almost scot free each time, tell me if you think they have learnt a lesson or not.

Whilst that is swaying slightly off topic, ill rein this in. Relevant to the above info, my answer to payday loans is the introduction of the DMP in Scotland that are protected from interest and charges. Basically all debts are put in a pot, all surplus money is put into it, there is no contact with creditors demanding payment, no interest or charges are incurred *the main benefit of it*, the companies get back at least their initial investments *rather than only getting some of it*. Therefore the debts are repaid in full, in an affordable time limit. Its not easy to put in all the surplus cash given the varying budget of modern life, but I think it would work.

I do agree companies should take responsibility, as they are financially trained especially given most of their customers are not. I'm not in debt other than a student loan, so I've not been faced with the companies head on, the only time credit card collections has rung me is when there own system failed to take payment (they billed the wrong bank account...). So I do have some ability to be unbiased, but then I lack experience. I do not see these as big companies with mega profits but always as personal arrangements, money is owed and agreements were broken. Obviously this is somewhat a flaw given the companies do not see you are a person, but as a revenue maker. The same amount of wealth always exists regardless of economics like inflation, its just a matter of its proportional distribution of it.