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MSE News: MP renews call for cap on payday loan costs

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  • JimmyTheWig
    JimmyTheWig Posts: 12,199 Forumite
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    Well I am for interest rates always being quoted as APR.

    I am not sure the Romans did, but either way I reckon "8%" is as much a disincentive for "companies" who wish to become moneylenders as it is for people who think they really need £100 now. Anyone who really needs £100 now in the UK needs to learn how to beg or turn up at the correct soup kitchen.

    We don't want them to get the idea that wanting £100 now is a normal vocation which they solve (for now) by pressing the buttons on their £500 iphone, now do we?

    I always reckon that any APR interest charge that is over double-digits is already in shark country.
    Borrowing £100 for a week at 8% APR would mean paying back £100.15. I presume that you don't really think that any organisation could arrange such a loan for 15p?

    So what you're really saying is that you don't think these companies should exist. And that they should, effectively, be pushed out of the marketplace by legislation?

    I can see the sentiment, but as this would end up with people turning to loan sharks it's not the solution that I'd go for.

    If you can't create a business that guarantees a profit without hammering customers who don't default then you don't have a business, you have a racket.
    The thing is, I think you _can_ have the best of both worlds.
    Wonga's typical example is borrowing £207 for 20 days. They charge a £5.50 fixed fee plus interest of £41.92 (at 360% pa), making total charges of £47.42 (4214% Apr).
    Now, if that's the sort of money that they need to make their business work then that's their call. And if that is typical of their customers then lets keep that figure fixed. But my problem is if it can't be repaid and the interest really then mounts up to an amount that isn't typical.

    So why not have a pricing plan that charges a £5.50 fixed fee plus a 19.8% fee (in this case £40.99) plus interest at 8% pa (in this case £0.93). Would give them the same typical returns but wouldn't hammer those who default.
  • opinions4u
    opinions4u Posts: 19,411 Forumite
    edited 9 December 2011 at 5:06PM
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    I think the advertising of PDLs should include a voiceover saying:

    "You must be a total f***wit to put yourself in to a position where you need a Pay Day Loan. Proper budgeting and planning of your finances is a better course of action".
  • 2sides2everystory
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    Now that O4U is telling it straight!
  • RobEssex
    RobEssex Posts: 40 Forumite
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    The company FLM quick run at 199% APR - they seem to be doing alright? - perhaps because they also have personal loans capped at 49.9% APR - that's possibly bringing in the profits.
    52 week money challenge £1/1378
  • Apples2
    Apples2 Posts: 6,442 Forumite
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    RobEssex wrote: »
    The company FLM quick run at 199% APR - they seem to be doing alright? - perhaps because they also have personal loans capped at 49.9% APR - that's possibly bringing in the profits.

    Maybe it's because they use Guarantors to ensure they get their money. They design in their defence mechanism from those who borrow but then have that "unforeseen change of circumstance".

    http://forums.moneysavingexpert.com/showthread.php?t=3655613&highlight=

    They simply protect themselves by taking money back from misguided but otherwise sensible people instead of relying on the applicant.
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