MSE News: 'About bloody time' - payday lending crackdown

Brains64

smartpicture wrote: »

What about the affordability requirement? Surely the point of Payday loans is that 90% of people can't afford them, the only people who use them are desperate and out of other options. So this rule will immediately stop 90% of the business won't it?

Yes, there is some degree of truth in that to be honest, it's like what someone once said about banks....'to get a loan from a bank nowadays you have to prove to them you don't need one':rotfl:, putting that to one side, the trouble with this legislation is that all it's really doing is attempting to address the symptoms, emphasis on attempting because just like a lot of legislation, it probably won't be easily enforceable, I suspect that many of these payday lenders will just carry on the same as they always do, I doubt if they will think 'oh gosh...we better be more careful about who we give loans to now....we'll do a lot more checking etc'...yeah...right, maybe the ones that check anyway will but the ones who can't be bothered now certainly won't care for this legislation, with regards to the addressing of symptoms, if people are having financial difficulties and I've been there, I know, there are very little options available, banks can offer advice, sure but they won't lend money when you're up the creek, if you've got your landlord on your back wanting rent they want to see some dosh, let's be honest about it, they don't want to hear sob stories with nothing else, my landlord was sympathetic to my situation up to a point in fairness but they wouldn't have stayed sympathetic for long if I wasn't giving them at least something towards arrears, payday loans are often the only option, they were for me so I understand why many turn to them, until there are other options then payday lenders will be booming in business in these times, payday lenders are not the problem, it's this government that's bleeding people dry, all very well some people saying 'don't use payday lenders' blah blah blah but when you've got people on your back for money you can't give them fresh air, I'm a realist and so I'm just being real, you won't get rid of payday lenders until there is an alternative for people that can't get loans from their bank, simples!

Apples2

emweaver wrote: »

All Martins alternatives are all very well if you have family to ask or your credit rating allows a credit card. I for one cant get a credit card, do not have one and can not get an overdraft. Grants from the job centre take ages to get, next pay day will come quicker and they are only for people on certain benefits.

You sound like the perfect target for this entire campaign.
You aren't considering a loan to cover that life emergency (car, boiler etc), you are looking for a loan to pay you WAGES.
A loan to give you an income because yours has all been spent.

You would look to take this loan right now even though it means paying considerably more out of next month's benefits, the same benefits which didn't last you this month.

John1993_2

Gentoo365 wrote: »

Personally I think that the rules should be amended such that anyone who takes out a payday loan is supplied with a booklet (or an e-mail) clearly entitled "Your Rights if you cannot afford to repay your loan". The booklet should explain that if they are unable to pay they can request a freeze on interest and an alternative payment plan.
.

It'd probably also be a good idea to include a section on their obligations, too, and a. One pointing out that they need to sort their finances out pretty sharpish, so as not to need such a loan again.

It could be paid for through a relatively modest 100% or so added onto the APR...

27col

Almost by definition, anyone who cannot make their money last until pay day is likely to default. How are they supposed to be able to repay the capital and the considerable interest when they could not manage previously when there was no loan or interest to pay from their wage packet.
It would be interesting to know what proportion of pay day loans are repaid in full on the due date.

rizla_king

http://www.theguardian.com/society/2013/oct/06/broke-britain-doorstep-lending

matttye

jamesd wrote: »

False: "Lenders must also only try to take full repayments."
The truth: Consumers do not lose their legal right to make partial payments at any time if they want to. But lenders are prohibited from taking less than the full amount due and payable using a CPA (6.41, 6.43 [7.6.12(3)] ). Some other method must be used instead. Note that it has to be the amount due and payable, so if you make an early partial payment, the CPA can still be used to collect the remaining part of a monthly or weekly payment on its due date, so you won't risk a late or missed payment just because you paid some of it early.

He said lenders must only try to "take" full repayments. I take that to mean by way of a CPA.

jamesd

Yes. That's why it's false: a CPA can be used for less than a full repayment. The actual constraint is the full due and payable amount. After a partial payment by a customer the due and payable amount is the remainder of the full repayment.

JuicyJesus

27col wrote: »

It would be interesting to know what proportion of pay day loans are repaid in full on the due date.

Wonga's default rate has been quoted at about 50%, and Wonga are one of the more scrupulous payday loan companies.

matttye

jamesd wrote: »

Yes. That's why it's false: a CPA can be used for less than a full repayment. The actual constraint is the full due and payable amount. After a partial payment by a customer the due and payable amount is the remainder of the full repayment.

You're splitting hairs here.

A "full repayment" and "full due and payable amount" is the same thing.

Scenario 1: I owe £100. Wonga takes £100 on due date.

Scenario 2: I owe £100. I pay £50 early. Wonga Takes £50 on due date.

In both scenarios they have taken "full repayments."

What they cannot do is take £50 if I owe £100, but don't have £100 in my account. Many PDLs currently keep trying to take lower amounts when they can't take the full amount due. That is what will no longer be allowed.

27col

JuicyJesus wrote: »

Wonga's default rate has been quoted at about 50%, and Wonga are one of the more scrupulous payday loan companies.

Sort of proves my point about PD loans.