Avoid pay day loans!

rodders65

They are loan sharks, there is no other way of describing them.

pvt

Let's have a stab at the economics of a £500 loan that someone needs to tide them over for a week:

Let's imagine there's a PDL rate cap. 50%AER seems reasonable, it's 100X BoE base rate.

So the interest payable on that is about £4.80.

Does anyone fancy that as a business model? You employ people to answer the phone, explain the terms, check the applicant's ID, check and assess the applicant's credit record, arrange the transfer of the funds to the applicant's bank account, report the activity to CRAs, and then a week later check the money has been repaid as agreed. And then add the risk of having to expend huge amounts of resource in some cases chasing non-payment or of writing-off those loans where the borrower has had the misfortune to die in a car crash in the intervening week.

Anyone fancy climbing out of bed to run a business on that basis?

pvt

rodders65 wrote: »

They are loan sharks, there is no other way of describing them.

Quite right!

Regulated, operating within the law, and wanted by numerous clients who value their service, repay on time, and will happily use them again. But loan sharks nonetheless.

davecooper71

It is huge business, you only need to look at the amount of companies operating in this space - the number is increasing each month. They make a lot of money, and the demand is growing.

you can argue its the fault of thew individual, but ultimately it needs to be policed better, as it seems out of control.

pvt

davecooper71 wrote: »

They make a lot of money, and the demand is growing.

Are you familiar with the concept of a market economy?

dktreesea

pvt wrote: »

Well why should that be limited to pay day lenders? What about high street banks and their OD interest rates?

What about Claridge's Hotel charging nearly £20 for a 50p shot of Whisky?

I'm gobsmacked at the number of people on this thread totally missing the point that you are responsible for your own actions! Every horror story about PDLs seems to start when a borrower doesn't repay on time, and AS AGREED.

There is a legitimate use for PDL companies that operate within the law. And the outrageous interest rates simply reflect the disproportionately high cost to them of administering a very small value, very short term loan.

Jeez - I never thought I would see myself defending PDL companies on here.............:o

There's a huge difference between a person who chooses to spend £20 at Claridges for a small glass of whisky, and someone forced, by circumstances not necessarily of their own choosing, to revert to a payday loan.

Yes, people are responsible for their own actions. But things happen. Circumstances change. People tend to plan their lives according to an income that they currently have an expect to continue.

How about this scenario? Your energy bill gets paid by your partner. You don't even realise it hasn't been paid, because he has moved out, transferred his mail to go to his new address. The first you realise is when you try to change over the electricity to your name, and that's when they tell you they can't do that because the previous bill hasn't been settled, £500 for the quarter that you simply don't have. Two days later they cut of your electricity. It costs the £500 outstanding plus a further £150 to get it reconnected. You don't have it. You have children to consider and the house is freezing. You could get a crisis loan, except you are not on benefits. You've never needed them up until now because there were two incomes coming in. As to your partner, he has cut off all contact. You don't know where he has moved to and his family aren't inclined to help you out on this score.

Just how exactly does that mean you haven't been responsible for your own actions?

Technically I concede the point. After all, you are free to wait until payday and just suffer not having the electricity on for the next 17 days or how ever long it takes to get to payday. You could drink water and eat sandwiches for the next two or three weeks while you wait to get paid. Probably no one HAS to take a payday loan, even in these kinds of circumstances. But it certainly doesn't mean that everyone who feels they are now in a situation where they need funds, can't wait and only has the option of taking out a payday loan has been living beyond their means.

As for borrowers knowing in advance that they will be able to pay any loan on time, let alone a payday loan, good luck with the fortune telling. I don't see how anyone can know this for sure.

I hope all greedy PDLs get replaced by companies like this:

http://www.ft.com/cms/s/0/229c0398-4b99-11e2-887b-00144feab49a.html#axzz2GTmd1Q4w

UsetheFORCE

dktreesea wrote: »

There's a huge difference between a person who chooses to spend £20 at Claridges for a small glass of whisky, and someone forced, by circumstances not necessarily of their own choosing, to revert to a payday loan.

Yes, people are responsible for their own actions. But things happen. Circumstances change. People tend to plan their lives according to an income that they currently have an expect to continue.

How about this scenario? Your energy bill gets paid by your partner. You don't even realise it hasn't been paid, because he has moved out, transferred his mail to go to his new address. The first you realise is when you try to change over the electricity to your name, and that's when they tell you they can't do that because the previous bill hasn't been settled, £500 for the quarter that you simply don't have. Two days later they cut of your electricity. It costs the £500 outstanding plus a further £150 to get it reconnected. You don't have it. You have children to consider and the house is freezing. You could get a crisis loan, except you are not on benefits. You've never needed them up until now because there were two incomes coming in. As to your partner, he has cut off all contact. You don't know where he has moved to and his family aren't inclined to help you out on this score.

Just how exactly does that mean you haven't been responsible for your own actions?

Technically I concede the point. After all, you are free to wait until payday and just suffer not having the electricity on for the next 17 days or how ever long it takes to get to payday. You could drink water and eat sandwiches for the next two or three weeks while you wait to get paid. Probably no one HAS to take a payday loan, even in these kinds of circumstances. But it certainly doesn't mean that everyone who feels they are now in a situation where they need funds, can't wait and only has the option of taking out a payday loan has been living beyond their means.

As for borrowers knowing in advance that they will be able to pay any loan on time, let alone a payday loan, good luck with the fortune telling. I don't see how anyone can know this for sure.

I hope all greedy PDLs get replaced by companies like this:

http://www.ft.com/cms/s/0/229c0398-4b99-11e2-887b-00144feab49a.html#axzz2GTmd1Q4w

Totally in agreement with the sentiment although the scenario you paint surely isn't correct as it wouldn't be your problem your partner didn't pay THEIR debt!

dktreesea

UsetheFORCE wrote: »

Totally in agreement with the sentiment although the scenario you paint surely isn't correct as it wouldn't be your problem your partner didn't pay THEIR debt!

That's true, but with utility bills, it's whoever is still using the house who gets cut off. And usually the utility company won't reconnect the power until outstanding bills have been settled.

Just because it came out of your partner's account when you were still together might not help you to keep the electricity on in this situation. Especially if there are complications like the partner has done a runner and you can't point the utility company in the right direction.

There are a heap of scenarios that are just quite hard to plan for. Many people simply don't have a stash of a couple of thousand pounds put aside for unexpected bills.

Thank goodness for the social lenders like the one I included in my previous post. Yes, they can be expensive too compared to banks, but at least they are viable and aren't going to cost an arm, a leg, and part of your soul.

Apples2

dktreesea wrote: »

I hope all greedy PDLs get replaced by companies like this:

http://www.ft.com/cms/s/0/229c0398-4b99-11e2-887b-00144feab49a.html#axzz2GTmd1Q4w

I think that is some way off yet.

That company has been trading since 2005 but is still yet to turn a profit. It relies upon donations from the wealthy to bolster loans from the banks.

Back at his desk, Mr Squires thumbs through the file of a man who is paying £344 a month in fees to three payday loan companies just to "roll over" his £1,900 of debt with them.
He hardly sounds creditworthy.
But Mr Squires, who has met him and studied his bank statements, decides to lend him £2,000, which will pay off the payday lenders and leave him with monthly repayments of less than half the amount he has been paying in fees.
"There are three types of payers: good payers, won't payers and can't payers," Mr Squires says. "He is a good payer. Someone just needs to give him a chance."

What happens if this man is one of the "won't payers"? That's £2k out of the pot for a start.
The risk is high that this "man", once free of Payday Loan hassling, will be free to take another payday loan.
The mainstream lenders have a long history of assigning risk. This model is prone to failure due to the very people it is there to help.


Oddly the Website: www.fairfinance.org.uk suggests

Domain name:
fairfinance.org.uk

Registrant:
faisel rahman

Registrant type:
UK Individual

Registrant's address:
The registrant is a non-trading individual

pvt

dktreesea wrote: »

There's a huge difference between a person who chooses to spend £20 at Claridges for a small glass of whisky, and someone forced, by circumstances not necessarily of their own choosing, to revert to a payday loan.

Yes, people are responsible for their own actions. But things happen. Circumstances change. People tend to plan their lives according to an income that they currently have an expect to continue.

How about this scenario? Your energy bill gets paid by your partner. You don't even realise it hasn't been paid, because he has moved out, transferred his mail to go to his new address. The first you realise is when you try to change over the electricity to your name, and that's when they tell you they can't do that because the previous bill hasn't been settled, £500 for the quarter that you simply don't have. Two days later they cut of your electricity. It costs the £500 outstanding plus a further £150 to get it reconnected. You don't have it. You have children to consider and the house is freezing. You could get a crisis loan, except you are not on benefits. You've never needed them up until now because there were two incomes coming in. As to your partner, he has cut off all contact. You don't know where he has moved to and his family aren't inclined to help you out on this score.

Just how exactly does that mean you haven't been responsible for your own actions?

Technically I concede the point. After all, you are free to wait until payday and just suffer not having the electricity on for the next 17 days or how ever long it takes to get to payday. You could drink water and eat sandwiches for the next two or three weeks while you wait to get paid. Probably no one HAS to take a payday loan, even in these kinds of circumstances. But it certainly doesn't mean that everyone who feels they are now in a situation where they need funds, can't wait and only has the option of taking out a payday loan has been living beyond their means.

As for borrowers knowing in advance that they will be able to pay any loan on time, let alone a payday loan, good luck with the fortune telling. I don't see how anyone can know this for sure.

I hope all greedy PDLs get replaced by companies like this:

http://www.ft.com/cms/s/0/229c0398-4b99-11e2-887b-00144feab49a.html#axzz2GTmd1Q4w

I'm not sure if you're disagreeing with me or not - you seem to have posted a scenario comprehensively arguing the very need for PDLs?

In the scenario you give, I would agree that as a last resort the PDL loan for £650 might be justified. And if the victim of the situation borrows it and repays it one week later, plus a fee that reasonably reflects the efforts of the PDL company, then everyone is happy. Well, all except those who then unrealistically express those fees as an AER % of the loan for its one week duration.

And the point of the Claridge's whisky to similarly illustrate their 4,000% mark up, if you chose to calculate it in the same terms. To those people who want a tot of Irish in Claridge's bar out of a fine piece of lead crystal, that mark up is probably considered fine.

But as we all know - the problem comes when that £650 is borrowed with no prospect or intention by the borrower of every paying it back on the agreed date. Suddenly, then, it becomes the PDL company's problem that the borrower cannot repay their loan as agreed. And indeed, even the PDL company's fault that the borrower may have lied about their circumstances - naughty naught PDL company for just, well, believing them! And when the PDL company try to get their money back, and invoke their published continuance charges, they all of a sudden become big bad bullies.

As I have said, I don't like PDLs, and wouldn't envisage myself using one. But I am trying to point out there are 2 sides to the story.

There are many needy people who have made use of PDLs in an emergency, complied with their agreement to replay the loan, and who are very happy with that service. It seems unreasonable to "stamp out these greedy PDLs" and deny legitimate users access to a service that nobody else provides, simply because of a minority of borrowers who lie about their circumstances to borrow money they cannot afford to repay as agreed.