Should Payday loans be legal?

barbiedoll

Hi Hannah, it's ok, I know you're not stalking me!

I know Cornwall very well, it's not just Rock that is full of millionaires living cheek by jowl with the unemployed locals. Lots of my Cornish friends are still living in rented accommodation because they can't afford to buy a home where they have lived all their lives. But you're right, a lot of us aren't in debt because we're stupid. I'm an amateur astronomer, I can understand (some) particle physics and I read the Independent, as well as the News of the World. But like many, I was bamboozled by the low rate credit cards, I was encouraged to get a loan for my double glazing (with a bit more on top to buy curtains, as the loan rep told me :mad:) I knew full well that if either OH or myself lost our jobs then we'd be in trouble. But my job with the NHS is pretty safe and OH worked for a local family haulage firm who had been in business for over 30 years. When they went bust, it made the local papers! If it hadn't, I wouldn't be writing here now.
I don't believe that the financial industry is run by financial experts. It is run by retailers who know how to make (and lose) a fast buck. If bankers had any financial nous at all, we wouldn't be in the situation we're in, despite Gordon Brown blaming it all on USA fiscal policies. The bankers are responsible for losing billions, they are gamblers, just like ampafc was. He was using payday companies to finance his habit, they use our money instead. That's also why we need education, maybe we can get some geniuses to run the banks instead of the half-witted meglomaniacs that we have at present.

Monkeyballs

Hannah,

You've hit the nail on the head when you say "The payday loans companies are all too frequently exploiting people who do not have (or do not know they have) recourse to advice. Who do not (or do feel) they have any other choice and who can not afford it (although they are often tricked into thinking they can)"

I would love to see people being given the opportunity to improve their standing in life and one way of doing this would be investing in further education in financial matters.

We are a bizarre generation, we seem to think that if we can have credit then why not take it? Instead of asking why we need what we think we'd like?

It's not a question of stupidity (not in all cases) banks have created this incredible idea that if you want something then you can have it, take it! It's yours!

This has eventually diluted down into small lenders offering those who have fallen the final dregs of credit available...

It's almost biblical if you think about it! All we need now is a new messiah to lead us into the financial revolution...

Hannah_10

Cornwalls problems with second home ownership and the resulting creation of an indigenous underclass are well documented and off topic, but as I do happen to know of a good many out at Rock whose fortunes are being made in payday loans and of a good many more in Bodmin sufferring for them then it makes a nice neat example to contrast.

I would disagree though about the finance industry. I think it is run by experts, if not staffed by them. In the same way as the vets probably has a receptionist who knows nothing about the diseases of guinea pigs; but the boss does and if the boss says Fluffy should have a £17 course of pills then the receptionist will be sure to bill you. In the same way I wouldn't imagine for one moment a double glazing salesman knows anything more about the possible complications and finacial impact of the product he is mandated to push. The people above him do though! They know exactly what they're doing.

They know how small a font they are permitted to put the T's&C's in and how to word those so normal people have little grasp of them. They know how to present it (with the help of marketting experts who will utilise every tool from monitoring Twitter for trends to Ivy League psychological research). They know how to maximise it (like the rolling over of payday loans). Most of all though, they know how to get away with it and just how misleading they can be and in what arenas (eg, by telephone) without getting caught or punished. They know the punishments too, some have actively willfully broken the law in the knowledge that even after deducting the maximum available fine they will still be in profit. (The founders of Yes Loans got rich this exact way).

Logbook loans (a kind of payday loans attatched to vehicles) are an excellent example of where the financial industry has been very clever. They are using, not a secured loan as we would understand it, but an archaic piece of legislature which in effect means you have actually sold your car to them. People just don't think of it, it's not how loans work after all is it, you don't sell your £2000 car for £350 until the 1st of next month do you... Except you just did. It's lurking in the T's&C's in a phraseology you've never used and will have to read 4 times with your head on one side to decode. Oh it's clever alright. As much contempt as I reserve for the entire credit industry, I have to conceed, they are clever b*ggers.

Clever b*ggers who, unles you've done an economics degree, you don't stand a chance with. You are a carefully researched target for thier greed and they know exactly how to make sure you don't have, or don't understand the information which would put you on a truly fair standing alongside them. The law says they must tell you, but it doesn't say they must tell you where you can easily see it and understand what it's going to mean to you personally does it. Just when you think you know where you stand the rug will be pulled.

Yep, education is long overdue.

Monkeyballs

So it's safe to assume you have strong opinions on the subject Hannah...

You are right though, but in making the statement you have above you've hit upon another factor.

Educating the population on a large scale can only go so far... The companies we are discussing here are not a group of n'er do wells, these are companies with teams of people who are always going to be "better educated" than you... After all, it's their job to be.

So again, we come back around to education. At what point do we need to say ok, hands up, education has improved and people are better informed but lenders are still finding loop holes and/or ways of wording their T&C's to baffle the rest of us and take our money?

Comes back to regulations...

bottleofred

Hi folks,

I've read all the posts with interest and would particularly like to thank Monkeyballs for starting it. However, regarding Hannas (I think you give excellent advice Hannah) and everyone elses post regarding education, I'm not entirely sure I agree. Please don't misunderstand me, I don't think it's a bad idea, but at the time I used one of these companies to cash cheques in, even if someone had told me it was costing a small fortune in interest I'd have probably still got the cheques cashed. In fact I did know how much it was costing (£14 for every cheque I wrote per month!) and I used to get 3 or 4 cheques cashed each month. I even got a £500 loan from them and paid it off over the year and am now shuddering at the thought of how much money I paid them back. It shows how good a customer I was, as when I eventually broke free from using them they used to send me money off offers (I kid you not £5 coupon for a £100 cheque!). In short, I simply needed the money and did whatever I had to do to get it. In short, it took me 39 years to be this stupid! Education will work for some people, but as I've said before, better regulation, a reduction in the %APR they can charge and better methods of helping people who get into financial difficulty with these guys are all needed in my opinion.

Red

Hannah_10

You seem to be mistaking giving a man a net for giving a man a fish MonkeyBalls.

I'm not talking about educating along the lines of set products, I am talking about teaching people how to question, where to look for the technicalities and how to find out your total options then decide what is right for you from that selection. It's got to be about teaching people how to think, rather than teaching them what to think.

By bringing financial education to the nation as a whole (in much the same way nutritional education has been given to us, like it or not) you then decrease the taboo of discussing it. You further decrease the victim blame. You make financial regulation and the finance industry at consumer level into a regular topic of debate in parliament and you will find regulation comes about at that point. Just like the school dinner budget got doubled in parliament.

Regulation should always be a last resort, until we actually have done the education bit we wont even know if we still need regulation, let alone where any we do need should fall.

Monkeyballs

Guys,

You have given excellent input into this discussion.

Red, thank you :-) I started this discussion to ask a simple question after seeing the vast number of posts going onto the DFW forum and it has developed into something much more. I really am glad I asked as it seems to be one area where people post for help but (and this could be because I'm fairly new to this site) nobody ever questions what can be done to stop people getting into trouble?

Hanna, I love your posts. You are seeing the problem at a high level, and you're right I was misreading your intention. While I agree that education needs to be the way forward I do not think that regulation should be the last resort. The problem exists now and while people can be educated 'retrospectively' it does not go any way to help those people in trouble now.

In addition there are those vulnerable members of society who will never learn, if they don't have the capacity to learn then do we just leave them to it? I don't think so. Perhaps the way forward is to actually regulate and educate at the same time, then in time people will look back on the regulations and laugh at them... "Interest rates should be no higher than 29.9%? DURRRR".

bottleofred

Bumped back up the board for any additional thoughts/discussion.

pink_princess

Monkeyballs wrote: »

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?

A) Isn t going to happen ,65 % of the monthly wage is the norm after 3 successful clears,
B)I feel should be within 24 hours at max.
C)Why would they do this, if they are paying off the interest ? They dont want full payment .They want them to forever just pay the interest fee ,month after month .
D) yet again they don t care ,they look at the bank statement and see multiple lenders on it being paid and think get in they pay them .

alfchild

WARNING!!!!!! DO NOT I repeat DO NOT use PAYDAY LOANS!!!!!!! I enquired over a month ago, didn't use as didn't get a loan so was told wouldn't be charged and guess what £61.50 has disapeared from my account and I can do F all about it. don't forget PAYDAY LOANS!!!

VERITABLE FINANCE THEY'RE CALLED just found a bit on the net do not use!!! people scammed before wish I'd have seen