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MSE News: Government in payday loan crackdown pledge

edited 30 November -1 at 1:00AM in Loans
16 replies 3.3K views
MSE_GuyMSE_Guy MSE Staff
1.7K posts
I've been Money Tipped! Newshound! Chutzpah Haggler
edited 30 November -1 at 1:00AM in Loans
This is the discussion thread for the following MSE News Story:

"The coalition will consider a cap on prices but stopped short of supporting a motion calling for immediate regulation ..."
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Replies

  • paddyrgpaddyrg Forumite
    13.5K posts
    Figures show one in ten payday loan borrowers earns £11,000 or less.

    I'd imagine one in ten earners in the country also earns under £11,000, possibly much higher depending on which ONS figures you base the figures on.
  • the govt hasnt made any such pledge,it wouldnt support the discussion in parliament today as its going to hold its own enquiry and thats about it really,there is a feeling amongst many govt mps that regulating these lenders further would lead to them withdrawing from the market,and for some reason they dont appear to keen on that option
  • paddyrgpaddyrg Forumite
    13.5K posts
    The loans do have a place, and as evidenced, they are actually used less by the poorest demographic than the slightly richer ones, which is a bit of a surprise. Using the ONS stats, looking at table 1.3a (I think it was), gross income all earning sources combined (the fairest I could find) the 20th percentile was around £198, and 25th about £250, so surprisingly the £11k and under earners represent around 22% of earners, so representing only 1 in 10 loans show the loans are not being oversold to that income group, rather undersold! Hence the loans have a place, looking solely at the numbers.
  • If you look at the actual cost of borrowing, it works out a lot cheaper than the excessive fees charged by major Banks for exceeding an overdraft limit. They don't seem too willing to crack down on that particular scam.
  • amcyamcy Forumite
    3 posts
    I think that Stella showed a complete lack of understanding of the real issue in her radio interviews yesterday. The fact that payday loans have massive APRs is the result of Governments laws saying how they need to be calculated and stated based on annual compounding. Payday loans are not meant to be compounded, they are meant to be short term, occasional, low value loans. They can (if managed properly) save a fortune against bank's overdrafted, bounced cheque, rejected direct debt, etc fees. That is the true comparison. What matters is the cost of borrowing - if I borrow £100 for 10 days and it costs me £10 in interest, then the APR is irrelevant, it is a good deal compared with the alternatives. Stella and her cronies are going for the easy headlines and ignoring the actual problems. If someone decides to cap interest rates, I imagine that will just make it harder to access funds as lenders will wish to reduce their exposure to bad debts.
  • Woodbine wrote: »
    the govt hasnt made any such pledge,it wouldnt support the discussion in parliament today as its going to hold its own enquiry and thats about it really,there is a feeling amongst many govt mps that regulating these lenders further would lead to them withdrawing from the market,and for some reason they dont appear to keen on that option

    Because the thinking behind it is that if these lenders left the market all together it would see the rise in unregulated doorstep lending where proper thugs scare the life out of people and charge the same if not more for borrowing small amounts of cash.

    And they wouldnt get rates from these lenders either
    "If you no longer go for a gap, you are no longer a racing driver" - Ayrton Senna
  • ~Brock~~Brock~ Forumite
    1.7K posts
    Part of the Furniture 1,000 Posts Combo Breaker
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    Can someone at MSE please advise why Payday lenders and doorstep lenders are constantly lumped into the same category when it is quite clear that traditional doorstep lenders do not add any extra charges in the event of late payment, which means that the total cost of the loan is the same as what is stated on the agreement regardless of how long it takes to pay back?
  • Easiest solution let Northern Rock do paydayloans and employ an army of enforcers. The government can pass a "We will break your legs Act" quite easily or in LLoyds case only one leg.
    The years starts today ....
  • Isn't it strange that the US has put a cap on these leeches of society that prey on the most vulnerable.
    What do the companies then do that worked in the US they come to the UK to set up their stalls like drug dealers moving to a safer location.
    The government needs to make it harder for those that are vulnerable to get access to money whilst bringing down the cost of living.
    The 2.5% increase in the minimum wage although it's a raise most would be happy with in other jobs still makes the minimum wage on October 1st 2011 £6.08 which is tough for those on that in certain circumstances.
    Wonga with their 4000+% interest are maybe not technically breaking the law but morally are the dregs of society feeding on misery and causing misery IMO .
    Yes folk should read the terms but the terms are laid out in a way to lull people into a false sense of security.

    Like aids and cancer I hope the world is eradicated of these diseases asap but with the MPs undoubtedly already getting donations from the financial institutions you then realise why they will not act quickly.

    If your a shareholder the value of your shares increase .
    just like drug peddlers making money out of addictions so pay day advance lenders are morally repugnant
  • ILWILW
    18.3K posts
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    Bet the "break your legs" lenders are rubbing their hands together.
This discussion has been closed.

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