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MSE News: Payday lenders risk 'grooming new generation' into debt, Martin Lewis says

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Former_MSE_Helen
Former_MSE_Helen Posts: 2,382 Forumite
edited 6 November 2013 at 11:42AM in Loans
"Martin joined other consumer groups, regulators and payday loan firms at a Parliamentary Select Committee into the industry..."
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  • michael1983l
    michael1983l Posts: 1,916 Forumite
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    There should be a minimum time of 5 working days between applying for credit and actually receiving the cash, except in the case of overdrafts. If you are not eligable for an overdraft, you can't afford a payday loan IMO.
  • Sinhanada
    Sinhanada Posts: 497 Forumite
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    There should be a minimum time of 5 working days between applying for credit and actually receiving the cash, except in the case of overdrafts. If you are not eligable for an overdraft, you can't afford a payday loan IMO.

    I agree on a time limit but disagree on a payday loan and overdraft. I had a take home pay of just over 2k, but did not qualify for an overdraft (due to some mistakes made two years previous) - this led me to get my first PDL which was paid back easily. Only then did it start to spiral. I approached my bank with a loan plan to pay back everything over 8 months. They refused again - quite understandably.

    I'm now with Step Change and 12 months away from clearing it all...four years later
  • michael1983l
    michael1983l Posts: 1,916 Forumite
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    Sinhanada wrote: »
    I agree on a time limit but disagree on a payday loan and overdraft. I had a take home pay of just over 2k, but did not qualify for an overdraft (due to some mistakes made two years previous) - this led me to get my first PDL which was paid back easily. Only then did it start to spiral. I approached my bank with a loan plan to pay back everything over 8 months. They refused again - quite understandably.

    I'm now with Step Change and 12 months away from clearing it all...four years later


    Casing point, so you couldn't afford it. Your at stepchange. I fallen into the trap myself, except my loans were taken under the influence of alcohol/drugs and spent in the bookies before I even had time to sober up.

    I should never have been able to get access to cash in that state, but there was nothing stopping me from doing so.
  • dealer_wins
    dealer_wins Posts: 7,334 Forumite
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    You should also not be allowed to hold more than 1 PDL at the same time.
  • opinions4u
    opinions4u Posts: 19,411 Forumite
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    48 hour cooling off period before release of funds.

    No more than one rollover in a six month period.

    Mandatory credit check.

    Mandatory instant report on credit files stating there's a distinguishable PDL and / or PDL application.

    Ban all TV advertising for them.

    Ban all telephone marketing trying to drum up business.
  • imoneyop
    imoneyop Posts: 970 Forumite
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    Ban the "brokers" who charge a fee just for spamming the [STRIKE]victims[/STRIKE]customers contact details to as many payday loan companies as they can.
  • JuicyJesus
    JuicyJesus Posts: 3,830 Forumite
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    opinions4u wrote: »
    Ban all TV advertising for them.

    This. So much this.

    Having their advertising banned during children's TV is a good start (I personally am in favour of all advertising being banned during all children's TV, not just for payday loans etc) but at the end of the day the adverts still pander to the desperate and those with poor financial education, and their services are presented in such a way that they are shown as far more casual and everyday than they actually are/should be.

    The Cash Lady adverts with Kerry Katona are a shining example, telling everyone how they're "fast cash for fast lives" (i.e. "busy mums") while stating the outright lie that the only alternative is "going to your bank and filling out loads of forms" (when applying for an overdraft or such is probably easier online that using Cash Lady's service.)

    Payday loans have their place. I have no real opposition to their existence. However they should be very strictly regulated and their advertisement should be curtailed quite drastically, in the same way that alcohol and tobacco advertising are strongly regulated. Alcohol advertisements cannot portray alcoholic drinks as promoting sexual success, popularity, success, happiness, attractiveness, etc; payday loan advertisements should not be allowed to portray ease of access, convenience, being a preferred solution for access to cash or use for non-essential expenditure.
    urs sinserly,
    ~~joosy jeezus~~
  • JuicyJesus
    JuicyJesus Posts: 3,830 Forumite
    First Anniversary Combo Breaker First Post
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    Tell you what, here's a simple list of regulations to TV and other advertising for PDLs which would actually make sense and immediately put a stop to some of the worst practises:
    1. Advertisements for payday loans must not be broadcast in peak hours or during the broadcast of programming aimed chiefly or solely at those too young to take out a payday loan themselves.
    2. Advertisements for payday loans must position themselves solely as a lender for emergency priority spending and must not encourage their use for any form of discretionary spending or for any form of non-specific spending (e.g. “a few extra pounds before payday”.)
    3. Payday loans must be portrayed solely as a service of last resort. Comparisons between payday loan services and mainstream facilities offered by banks and building societies, such as but not restricted to overdrafts or credit cards, must not be offered.
    4. In addition to the APR (annual percentage rate) required to be displayed by law, in equal sized and typefaced lettering to the APR the advert must also display the cost in interest of borrowing a nominal sum of £100 for 14 days.
    5. The advertisement must bear the following risk warning in such a way that it is visible, legible and not obscured in any way:“Payday loans are a serious financial commitment and should not be taken out unless you will be fully able to repay the loan on the due date specified without causing yourself hardship. Failure to repay will lead to damage to your credit rating; use of payday loans may be viewed negatively by other lenders.”
    urs sinserly,
    ~~joosy jeezus~~
  • 2010
    2010 Posts: 5,386 Forumite
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    Payday lenders risk 'grooming new generation' into debt.

    Not only PDL, the BoE for the last 5 years with .5% interest rates.
    The government with their "help to buy" pushing up house prices, hence debt.
    All the banks with their easy to get credit cards and loans, etc, etc.

    The whole economy is built on debt and borrowing encouraged by all these people.

    Keep borrowing and spending is the mantra.
  • cjno1
    cjno1 Posts: 31 Forumite
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    I still think that the focus should be more on educating the public rather than limiting the payday lenders. I agree there are some seedy practices out there but the big lenders, the ones which are responsible for the vast majority of loans, are very clear about their loan practices, carry out credit checks and make it very clear what you will pay back and when.

    There's a real lack of personal responsibility in this country. There's too many people who say that "it's too easy to get into debt" or "I should never have had access to that money" but it's still your choice to take the loan. Ultimately, only you can decides whether it's the right decision for you to take the loan, you can't say that it's completely up to the company to decide whether you should borrow or not. Just because someone says you can borrow money doesn't mean it's a good idea to do so.

    Could you imagine if you went into a travel agents and signed up for a £1000 holiday which you couldn't afford to pay for later. People would have little sympathy if you tried to blame it on the travel agent for allowing you to purchase the holiday. It's not any different with anything that you buy now and pay for later.

    I'm sorry if it sounds harsh, but simply limiting payday lenders doesn't fix the underlying problem that people are terrible at managing money. If you make it much harder and more expensive to get these loans, how does that help the customers? We should focus on teaching people how to budget, etc, and remove the underlying issue.
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