MSE News: Government wants more time on payday loan cost cap

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Former_MSE_Guy
Former_MSE_Guy Posts: 1,650 Forumite
I've been Money Tipped! Newshound! Chutzpah Haggler
This is the discussion thread for the following MSE News Story:

"BIS today announced it will carry out further research into the high cost credit industry before deciding on a cost cap ..."
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  • madmonkey01
    madmonkey01 Posts: 72 Forumite
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    their costs are not that high, if they are used as intended, and paid back in the agreed time frame. they can save you hundreds in bank charges.

    but they ar enot a long term solution, and that is where people get problems
  • Fru_T_Bun
    Fru_T_Bun Posts: 37 Forumite
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    Would this open the door to people reclaiming money should they decide on a cost cap?
  • Gorgeous_George
    Gorgeous_George Posts: 7,964 Forumite
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    Fru_T_Bun wrote: »
    Would this open the door to people reclaiming money should they decide on a cost cap?

    It would certainly open the door for Claims Companies to prey on the least financially savvy members of society.

    It could also close many PayDay loan companies down resulting in less choice for temporary indebted.

    GG
    There are 10 types of people in this world. Those who understand binary and those that don't.
  • Consumerist
    Consumerist Posts: 6,310 Forumite
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    edited 19 July 2011 at 9:21PM
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    I think a blanket cap on costs is not very reasonable or sensible. Sorry Martin.

    It seems to me that it might be better to separate the set-up costs from the ongoing loan interest because the former costs are relatively high as a proportion of the overall charge for a small loan amount.

    Mainstream banks won't even consider making loans in the tiny amounts lent by pay-day lenders; they are not interested in making small profits on high volumes.

    I am glad that the matter is going to be considered further so that a knee-jerk reaction can be avoided by those who simply don't understand the reason why small loans over short periods can generate disproportionately high APRs. Let them work out the APRs on £5 per day charges on small overdrafts and let's see them cap these costs if they want to do something genuinely useful.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • taxsaver
    taxsaver Posts: 620 Forumite
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    I agree, the bank charging structures/penalties (especially Halifax) are extortionate and a far greater danger than payday loans. To take out a payday loan you have to make an active decision to do so and have every opportunity to find out and understand the terms before doing so.

    The banks on the other hand, having the benefit of customer salaries going into accounts, have the distinct 'advantage' of being able to rip-off consumers who do not make an ACTIVE decision to borrow, often simply making a mistake or losing track and once done so it can quickly become a vicious downward spiral.
    If you feel my comments are helpful then I'd love it if you 'Thanked' me! :)
  • [Deleted User]
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    credit unions are the best option
    as for pay day loans,dont like the cost?dont borrow from them
  • simon_the_poet
    simon_the_poet Posts: 186 Forumite
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    edited 19 July 2011 at 10:35PM
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    I have been following Stella Creasy's(MP) campaign for some time and her valiant attempt to get some kind of regulation in parliament.
    Here is the aformentioned debate fromn hansard
    http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm110704/debtext/110704-0002.htm#1107044000001

    Personally i think that something needs to be done to limit these loans as quickly as possible. The main reasons for the huge expansion of pay day loans is the lack of regulation in this country. Over the pond and in Canada where these loans first appeard there has been regulation for some time, with them being completely banned in some states. Most of these companies are based over there and they freely admit that they are making the most of an unprepared market.

    Regulation usually takes the form of a lmit on the amout of role overs to three or four, some limit the amount of the loan in comparison to the monthly wage a rate cap of course, and there are also limits to the number of loans available within a set time limit in some states.

    Yes I can see the atraction of a Total charge for credit cap. But it will only work of coursre if the term is standardised for all these loans, one of the aspects of APR is that it factors the time for repayment into the calculation.

    Another problem would be cancellation. Under the CCD regulations these loans would be cancellable within 14 days as i understand it. Upon cancellation only the principle plus interest up until repayment is due, any charges or fees cannot be charged, so any set up fees would have to be sepperated out, i dont suppose this is a major problem

    Simon
  • alunharford
    alunharford Posts: 198 Forumite
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    woodbine wrote: »
    credit unions are the best option
    as for pay day loans,dont like the cost?dont borrow from them

    Unfortunately, I have no choice but to borrow from payday loan companies by proxy through general taxation.

    The vast majority of these companies' customers are receiving some form of benefits/tax credits. These are intended to prevent poverty and instead they're being given to the payday loan companies. Then we spend even more money enforcing these debts in the courts. (Remember that we as a society choose to enforce the debt).

    We're (quite rightly) not willing to let children starve because their parents are in debt so we then add the cost of debt repayment into the benefit system. Effectively it's government debt being hidden off the balance sheet at 4000%+ APR.

    The solution isn't to create some kind of extra regulatory framework around fees - the solution is to remove the court fees from bankruptcies and discharge bankrupts immediately. Lending to people who can't pay you back without state assistance then becomes unprofitable overnight.
  • simon_the_poet
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    Unfortunately, I have no choice but to borrow from payday loan companies by proxy through general taxation.

    The vast majority of these companies' customers are receiving some form of benefits/tax credits. These are intended to prevent poverty and instead they're being given to the payday loan companies. Then we spend even more money enforcing these debts in the courts. (Remember that we as a society choose to enforce the debt).

    We're (quite rightly) not willing to let children starve because their parents are in debt so we then add the cost of debt repayment into the benefit system. Effectively it's government debt being hidden off the balance sheet at 4000%+ APR.

    The solution isn't to create some kind of extra regulatory framework around fees - the solution is to remove the court fees from bankruptcies and discharge bankrupts immediately. Lending to people who can't pay you back without state assistance then becomes unprofitable overnight.

    surely regulation would stop the debt happening in the first place?
  • ihateyes
    ihateyes Posts: 1,326 Forumite
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    ive no prolem with the APR offered by these companies, aterall its short term.

    What does need capping is their xfer charges.... some of these companies charge upto £20 for a faster payment transfer... then if you rollover, on top of the interest, they charge this fee again.

    These xfer charges should be banned.
    Promo codes are never always cheaper..... isnt that right EuropCar?
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