MSE News: Finally! Government to cap costs of payday loans

Nice_Weather_For_Ducks

I think overall this is a good move, because it will force PDL companies to look a little bit more carefully at applications for affordability.

I would say there will be quite a drop in the number of customers being accepted after the new rules come in.

I think they also need to make broker fees illegal as so many people get virtually scammed by these companies.

Brokers should be paid fees by the loan company they introduce their client to.

JuicyJesus

Nice_Weather_For_Ducks wrote: »

Brokers should be paid fees by the loan company they introduce their client to.

That is the exact model the Retail Distribution Review was intended to put a stop to in the field of investments and pensions.

Alpine_Star

N1AK wrote: »

The payday lender market may well be full of parasites but it's a competitive market of parasites.

Competitive markets don't usually get referred to the Competition Commission for investigation http://www.competition-commission.org.uk/our-work/directory-of-all-inquiries/payday-lending

chanz4

So are they going to look at provident also? As there fees are sky like vanquis their card.

All this will do is make people bankrupt quicker, or crime go up. Companys wont risk as much

gadgetmind

1) Borrow some emergency money.
2) Pay of debt come pay day.

No problem. What is a problem is people who miss out step 2.

jonesMUFCforever

Do you know what I think is the major problem today? It is not the interest charged or the stupidity of people borrowing knowing they can't pay it back BUT the passing around of debit card numbers by ''brokers'' and the unauthorised fees of £69 or so debited to accounts.

These new proposals won't change this at all.

rizla_king

chanz4 wrote: »

So are they going to look at provident also? As there fees are sky like vanquis their card.

The powers given to the FCA by the Financial Services Act 2012 to make rules were very general. Simply allowing them to prohibit authorised companies and people from making credit agreements where charges/interest exceed a certain level. So they could easily include doorstep/home lending etc in any new set of rules.

brendon

gadgetmind wrote: »

1) Borrow some emergency money.
2) Pay of debt come pay day.

3) Rinse. Repeat.

JuicyJesus

chanz4 wrote: »

So are they going to look at provident also? As there fees are sky like vanquis their card.

All this will do is make people bankrupt quicker, or crime go up. Companys wont risk as much

Indeed. People who criticise payday loan rates generally do not understand the concept of rating for risk.

More risk = more reward needed to justify the increased risk = higher interest rates. Short term lending is risky; very short term lending is even riskier; emergency very short term lending is risky as hell. And that's even before you start to factor in the fixed costs of providing a loan.

Pincher

This situation always reminds me of a documentary about the American Midwest. The rail companies built the tracks to open up the interior. The government gives land away, sometimes for free, to entice people into getting a bank loan and become farmers. Full of dreams, simple folks take it on without understanding the economics and get further and further into debt. The people who sells machinery and seeds, the banks and the rail company just repossess them and ship in fresh meat from the East.

In England, the analogy is the property game. Instead of providing a stable rent controlled environment like the Europeans, the state itself is complicit in encouraging home ownership by people who cannot afford it. The economic activity generated by the property market benefits lenders, builders, agents of all kinds, and ultimately the Treasury. Provided property prices keep rising, and more first time buyers pile in, the system grinds on. The problem is, prices are now so high, that low income households spend all their money on housing, which are money pits with a bottomless hole. If you remove the cost of housing with a magic wand, you'll see empty Pay Day Loan shops closing across the country.

Reduce the population. One child policy per adult, so a couple can have two children. More than two, tax them. More than four is a crime against society: deport them to Australia.

There is a really good idea moving forward: Institutional landlords.
Pension companies interested in long term cash flow build and run energy efficient communities. The rent pays pension annuities. OAPs who are not keen on owning and maintaining their own property can exchange it for purpose built retirement homes, with resident carers on site, freeing up housing for the general market. As always, needs proper scrutiny against exploitation.