Payday lenders told to offer compensation - MSE News

Former_MSE_Naomi

The financial regulator has written to payday lenders today telling them they must compensate customers who were sold unaffordable loans...

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'Payday lenders told to offer compensation'

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[Deleted User]

Haven't many of them been doing that already?

DCFC79

venison wrote: »

Haven't many of them been doing that already?

Maybe so but there could be others who haven't started compensating its customers yet.

glennstar

This guidance has been in place since 2010/11. When is the FCA going to stop issuing guidance and start prosecuting violations?

I think the fundamental problem is that the regulator is not educated/competent enough to deal with products like this... which makes me shudder to think what they are doing about Complex Financial products.

T-G-C

That is all good and well, but until further regulations are introduced, such as a stricter interest cap of 300% APR, a limit of one loan; per customer until repaid in full and abolishing default charges to prevent further financial stress, the ongoing problem of short-term high-cost loans will not stop.

I have never seen the logic, other than for profit maximization, to charge a customer £12 for missing a payment, when in 99.9% of cases, for short-term high-cost loans, the customer is in financial stress and requires support rather than more debt with more interest.

I cannot see how it is hard for them to bring in new rules and when doing so, have waited until the pressure point is maxed out, such is in 2014 when Wonga were offering unimaginable interest rates until more and more people were suffering and the regulators had to do something about it. It seems that their care for these businesses going bust from water-tight regulations are higher than care for the millions of consumers falling into the trap.

[Deleted User]

Oh dear. First started using payday loans in 2009 - £170 back in the year of 2012 has kept me honest. I would not expect payday uk, payday express, toothfairy, CFO lending to name a few who are now gone to compensate me now!

When will it move on to other companies who fall under the financial services who get to charge admin fees and missed payments when their customers are also considered a risk and ahem targeted audience - I actually think I had it far easier as a customer of such now

Ring, ring...
"Hi payday loan company, I need to change my card details.
Payday loan company: Thanks, to do this over the phone, there will be an admin fee of £25 today.
Or you want to cancel your finance loan, that will be a £75 cancellation fee please."
No don't remember that in recent times. Pence in interest charged per day yes but never greeted with an additional 'tariff of charges'.

But it's the type of world that's being created. (Maybe for every single complaint attempt that goes to the FOS costs £550 it's needed so the only thing is not to rile the customers up)
Ok if you don't have to work in something that feels immoral I guess but hey we all have to keep the wages coming in - one company this year didn't ever pay 60 hours worked - no where really I could turn to. The payday lenders currently have nothing on many companies I've worked for over the last year! Needs must.

Nasqueron

T-G-C wrote: »

That is all good and well, but until further regulations are introduced, such as a stricter interest cap of 300% APR, a limit of one loan; per customer until repaid in full and abolishing default charges to prevent further financial stress, the ongoing problem of short-term high-cost loans will not stop.

I have never seen the logic, other than for profit maximization, to charge a customer £12 for missing a payment, when in 99.9% of cases, for short-term high-cost loans, the customer is in financial stress and requires support rather than more debt with more interest.

I cannot see how it is hard for them to bring in new rules and when doing so, have waited until the pressure point is maxed out, such is in 2014 when Wonga were offering unimaginable interest rates until more and more people were suffering and the regulators had to do something about it. It seems that their care for these businesses going bust from water-tight regulations are higher than care for the millions of consumers falling into the trap.

Abolishing default charges will mean people just borrow and don't pay back as there is no penalty for doing so. As bad as pay day lenders are, plenty of borrowers play the system.

APR are high because the loans are short term, an APR of 3650% seems high yes but that's because no-one borrows a pay day loan annually - over 365 days it's 10% a day. If you cap it at 300% then pay day lenders will not bother operating as it's not cost effective which just means people will end up back with loan sharks. The more obvious solution is a cap on maximum fees based on one loan of say 10% of the borrowed value or whatever.

You will never get away from lenders of short term loans be it pay day, log book or pawn shops because there are people who need it either because of poverty, poor money management or whatever

kwame41

An APR of 3650% doesnt seem high it is!


High doesnt cover it.


Ive no sympathy for scumbag pay day lenders preying on the poor and adding to their misery.


I do feel for people that feel their only option is to use them. Whether its a lack of intelligence, poor money management or anything else.

Blackbeard_of_Perranporth

Pay day loan providers exist to fill the gap caused by economic mess of going between jobs or DHSS payments!


If we had a better DHSS and work balance, they would ...

Nasqueron

kwame41 wrote: »

An APR of 3650% doesnt seem high it is!


High doesnt cover it.


Ive no sympathy for scumbag pay day lenders preying on the poor and adding to their misery.


I do feel for people that feel their only option is to use them. Whether its a lack of intelligence, poor money management or anything else.

It is high as an annual rate yes but you aren't borrowing on an annual rate are you? A pay day loan is a few days at 20-30% interest on a small loan e.g. borrow £200, pay back £230 or whatever, not borrow £1000 pay back £5000+.

I'm not saying pay day lenders are good, as they aren't, but for some people it's that or they go to a local shark who will break their fingers if they don't pay it back or resort to prostitution or whatever so drumming the firms out of the market just means more people suffer.

As I said, a cap on the maximum someone has to repay as well as limits on rolling over loans is sensible else you drive it underground and who is going to regulate Big Barry with his baseball bat?

kwame41

The problem is when these loans cant be paid back and continue longer though.


They all use the loan shark argument to justify. I dont accept that all the people caught up in pay day lending would go to a loan shark if they didnt exist.


A small percentage yes.