Has the FCA got the payday loan cap right? Have your say!

sjohnson1982

I don't work for anyone within this industry but my partner does,


what I can say is that The Cheque Centre who used to offer payday loans have now withdrawn from offering this out as a service all together which has had a massive impact on their turnover.


as a result of their loss of profit etc they are closing a hell of a lot of stores nationwide.


out of 400+ stores they have they are only keeping around 60 stores open.

Apples2

sjohnson1982 wrote: »

what I can say is that The Cheque Centre who used to offer payday loans have now withdrawn from offering this out as a service all together which has had a massive impact on their turnover.
.

Well that's no surprise. With the new caps in place, it is not worth the expense of trying to chase the non payers.
I'm sure there will be a lot more to fall/restructure yet.

fingers crossed your partner retains a job.

michael1983l

sjohnson1982 wrote: »

I don't work for anyone within this industry but my partner does,


what I can say is that The Cheque Centre who used to offer payday loans have now withdrawn from offering this out as a service all together which has had a massive impact on their turnover.


as a result of their loss of profit etc they are closing a hell of a lot of stores nationwide.


out of 400+ stores they have they are only keeping around 60 stores open.

Thanks for the info. It seems that these companies just wanted to be able to target the vulnerable, judging by the actions of the Cheque Centre. As now the possibility of leveraging extortionate charges has been removed, it has been deemed an unprofitable business by the lenders, to only target those likely to pay back, thus be affordable and will not roll over loans.

Which confirms the regulators suspicions in the first place, that these companies were specifically targeting customers they knew would struggle to pay back the loans in light of adding many further charges and thus vindicates the actions taken by the FCO.

In my personal opinion and off the experience of the aggressive and often illegal approach by some of the PDL's to debt collection I am more than happy to see the loss of these establishments off our high street.

I am also sad to see the loss of jobs for ordinary people too, however I think that is a small price to pay for the protection of the most vulnerable in society.

hedge_hog

michael1983l wrote: »

This old tale of turning people to loan sharks is a load of old tosh. I have not been able to obtain credit or lend off family for a couple of years now and yes I have had emergencies and so on and so forth. Instead of getting debt to get me out of the situation I have learned to be much more resourceful and have got out of situations without the requirement to borrow extra cash.

People can and will manage without credit, and lets be honest if a Payday Lender is likely to turn them down it means they can't afford the credit in the first place anyway.

I have to agree with Michael. If you have to resort to payday lenders then you probably cannot afford credit at all. Live within your means and save for what you want, the only exception would be large purchases like a house, but there are alternatives to buying one. Get your priorities right and spend on the essentials first, not on unaffordable luxuries.

Clive_Woody

michael1983l wrote: »

Thanks for the info. It seems that these companies just wanted to be able to target the vulnerable, judging by the actions of the Cheque Centre. As now the possibility of leveraging extortionate charges has been removed, it has been deemed an unprofitable business by the lenders, to only target those likely to pay back, thus be affordable and will not roll over loans.

Which confirms the regulators suspicions in the first place, that these companies were specifically targeting customers they knew would struggle to pay back the loans in light of adding many further charges and thus vindicates the actions taken by the FCO.

In my personal opinion and off the experience of the aggressive and often illegal approach by some of the PDL's to debt collection I am more than happy to see the loss of these establishments off our high street.

I am also sad to see the loss of jobs for ordinary people too, however I think that is a small price to pay for the protection of the most vulnerable in society.

Where will these vulnerable people turn now when they 'urgently' need money?

I am not supporting PD lenders, but their business model (i.e. high APR) was based on the fact that a big proportion of their customers would not pay back on time, if at all therefore those that did repay covered those loses to make them profitable.

Many of these vulnerable customers knew that they would never be able to repay the loans that they were taking out yet went ahead anyway and took the cash on whatever terms were offered. The lenders knew this too.

It's no secret that the target audience for wonga and it's ilk were people who could not get credit elsewhere. Equally people who wanted/needed cash but couldn't get it elsewhere and knew they couldn't repay it anyway targeted PD lenders. It works both ways.

michael1983l

Clive_Woody wrote: »

Where will these vulnerable people turn now when they 'urgently' need money?

It is illegal to obtain money off a loan shark. So in essence it is like saying we should legalize cocaine, so that it can be sold responsibly instead of allowing drug dealers to sell it illegally.

So although there will be some people that will approach loan sharks, there is little that can be done about that, much like the distribution of drugs.

It should be dealt with by the police.

I am glad to see the back of PDL companies, as they cause misery for a lot of people. I have learned a few lessons along my journey and I am sure that I can now operate without credit for day to day living.

curiosity101

Clive_Woody wrote: »

Where will these vulnerable people turn now when they 'urgently' need money?

Budgeting loans from the government? (the alternative to the crisis loan I think)

There is also, borrow from family, sell items, extra work, freecycle etc (all mentioned in an earlier post)
You can even carboot freecycle items if you're really stuck!

Pay day loans were never the solution, people that went there obviously couldn't get accepted for a sensible rate loan... Making pay day loans less profitable is definitely a step in the right direction.

And if people go to loan sharks then so be it. It's a shame people feel the need to ('feel' the need...), but you can't wrap everyone up in cotton wool. Sometimes people have to learn by their mistakes...

I do feel that money management should be taught in schools though, that seems to be where the real would be.

Clive_Woody

curiosity101 wrote: »

Budgeting loans from the government? (the alternative to the crisis loan I think)

There is also, borrow from family, sell items, extra work, freecycle etc (all mentioned in an earlier post) You can even carboot freecycle items if you're really stuck!

Pay day loans were never the solution, people that went there obviously couldn't get accepted for a sensible rate loan... Making pay day loans less profitable is definitely a step in the right direction.

And if people go to loan sharks then so be it. It's a shame people feel the need to ('feel' the need...), but you can't wrap everyone up in cotton wool. Sometimes people have to learn by their mistakes...

I do feel that money management should be taught in schools though, that seems to be where the real would be.

Not sure that the government has a spare few £million to hand out to people who have no means of paying it back. This was the gap filled by PD lenders. Pretty sure that this gap still exists but now has no one occupying it.

The second lot of options have always been applicable but people either did not have these open to them or decided against them.

Less profitable pay day loans will mean that they are only offered to people with a higher probability of paying them back. These companies are not going to start running at a loss.

Totally agree that better financial education is needed from an early age. Martin has been campaigning for this for a long time.

rizla_king

FCA consult says.

How will the price cap affect consumers?

1.25

We believe there will be two main groups affected by the cap: consumers who will still be eligible for high-cost short-term credit and those who will no longer get loans.

1.26
Consumers who are still eligible for high-cost short-term credit will benefit from lower prices. We estimate their median saving per loan to be £14 and the median annual saving £76. The average annual saving would be £193. Total savings for consumers would be approximately £250 million per year.

1.27
We estimate that 11% of individuals who would otherwise get high-cost-short-term credit(about 160,000 people a year) would no longr get loans. However, we believe that for most of these people, a payday loan or other form of high-cost short-term credit is not the best outcome for them due to the high cost, particularly if they are unable to pay back on time.

The effect of our cap will prompt more people in financial difficulty to seek other ways of handling their situation, such as by seeking debt advice. Apart from a short initial period we believe these customers will be better off not having taken out a loan.

1.28
Our research indicates it is unlikely that these customers will turn to illegal money lending. Fewer than 5% of customers who had been turned down for a loan told us they had considered going to an illegal money lender, while 2% reported having used one since July 2013. (We recognise,however, that people may be reluctant to report using illegal lenders so the results of our survey may be underestimated.)

wacsa

I have used a couple of payday loan companies around christmas time a few years back as I get paid on the last working day of the month.

However the only time I was short in the past 12 months I used the Credit Union set up by my workplace Union.

More people who use payday loans have to start realising that Credit Unions are a much better option for people who get refused by mainstream lenders. Most of them offer payday type loans (30 days) but many offer loans for 12 months or more.

Yes some state you have to save with them (minimum of £5-£10 a month), but this is often for loans that last longer than 30 days.

The good thing is their APR is capped by Government at 25% I think.

The unappealing thing about them, for payday loan customers is that it's not instant, many of them insist on filling forms and ID etc, even after approval I think the process can take days with some Credit Unions. This puts people off as the payday loan companies use the instant availability of internet or even text messages.