MSE News: MP to step-up payday loan cost cap moves

edited 30 November -1 at 1:00AM in Debt-Free Wannabe
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  • FireWyrmFireWyrm Forumite
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    Pay-day loans do serve a purpose if used for the purpose for which they are designed. If, for example, you insist on using a screwdriver to cut a cake then you should expect a messy result.

    I don't think pay-day loans are any worse than, say, the £1, £2 or £5 daily overdraft charges made by mainstream banks; curtailing these charges would be more productive for the consumer than banning pay-day loans, in my opinion.

    Absolutely. The thing that the banks have done most to keep people out of trouble is curtailing the bouncing yoyo direct debit situation where one would bounce, you were charged which pushed you further in and then rinse and repeat for all your DDs that month. PDLs are the very last resort when you are literally starving, not so that one can buy food because one bought the latest iDevice with the money instead. People are acquisitive by nature, but we have a never never economy and sooner or later, it has to stop....which is what we are seeing. PDLs are the last gasp of this never never fantasy economy where everyone has everything they want whether they can afford it it or not.
    Debt Free! Long road, but we did it
    Meet my best friend : YNAB (you need a budget)
    My other best friend is a filofax.
    Do or do not, there is no try....Yoda.

    [/COLOR]
  • ConsumeristConsumerist Forumite
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    FireWyrm wrote: »
    . . . PDLs are the very last resort when you are literally starving, . . .
    They can be cost effective if, for example, you can use a PDL to avoid overdraft charges of £5 per day - providing you repay the overdraft and PDL promptly when you get paid. PDLs are simply not designed to be long-term loans.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • simon_the_poetsimon_the_poet Forumite
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    Part of the Furniture Combo Breaker
    I have been following Stella Creasy's(MP) campaign for some time and her valiant attempt to get some kind of regulation in parliament.
    Here is the aformentioned debate fromn hansard
    http://www.publications.parliament.u...#1107044000001

    Personally i think that something needs to be done to limit these loans as quickly as possible. The main reasons for the huge expansion of pay day loans is the lack of regulation in this country. Over the pond and in Canada where these loans first appeard there has been regulation for some time, with them being completely banned in some states. Most of these companies are based over there and they freely admit that they are making the most of an unprepared market.

    Regulation usually takes the form of a lmit on the amout of role overs to three or four, some limit the amount of the loan in comparison to the monthly wage a rate cap of course, and there are also limits to the number of loans available within a set time limit in some states.

    I think perhaps the point is being missed here by some. Working in the poorer areas i see the effects of these “loan sharks” every day. I don’t know about the Statistics, but I do see people coming into the office with up to eight of these loans using one to pay off the other.
    You only have to look at where these loans are advertised to see exactly where their target market lies, it is all very well to sit back and say, it is their own fault, but if we want to live in a civilised society we have to take responsibility for the more vulnerable members of that society.


    Simon
  • JimmyTheWigJimmyTheWig Forumite
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    Regulation usually takes the form of a lmit on the amout of role overs to three or four
    I agree with just about all of this post, but I don't think the suggestion I've quoted would necessarily help.
    What's to stop someone rolling a loan over three or four times and then taking out a different loan with a different company? Or if they can't get a loan with a different company how will they pay back the first company after three or four rollovers?

    I'd rather see a fee (fixed and/or percentage of the loan) added at the start and then a lower ongoing interest rate. This would still produce an APR in the thousands - I don't have a problem with that as I understand that these companies need to cover their costs - but wouldn't make it so crippling if your circumstances changed and you needed to roll the debt over.
  • HI
    In some states all companies have to record loans issued on a central database. This prevents multiple applications.
    Simon
  • JimmyTheWigJimmyTheWig Forumite
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    HI
    In some states all companies have to record loans issued on a central database. This prevents multiple applications.
    Simon
    Then what happens if they can't repay the payday loan at the end of the term? Or if they repay it and then can't live through the rest of the month?
    Are they not then back in the hands of loan sharks?
  • edited 5 September 2011 at 1:14PM
    ampafcampafc Forumite
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    edited 5 September 2011 at 1:14PM
    Unfortunately, I have fallen into the payday loan trap before. Right now, I have four payday loans to pay off, and am trying to agree repayment plans with the companies.

    It is true that it is not just the poorest people in society getting involved with this type of finance. I earn over £26,000 per year, and the reason that I have got payday loans is to fund/service my gambling addiction and associated debt. I am currently seeking help dealing with the addiction, and the debt is moving away slowly. Funnily enough, I have seen payday loan adverts appear at racecourses, and on TV racing channels. Doesn't take a genius to work out that they are targeting gambling addicts as one of their customer types. A gambler will see the chance of getting maybe a £300 loan, which will probably take around £400 to repay. The gambler will try to make enough money to cover the repayment, and then make some money in profit. But he ends up losing the money, is forced into further debt, and ends up taking ANOTHER payday loan with another company, and the process starts again.

    I would like to see some sort of payday loan regulations, including:

    A cap on the number of payday loan lenders. I don't know how this could be done, but in my experience, the first payday loan simply leads on to another with a rival company. If there were only maybe two/three companies out there, such as Quick Quid, Wonga etc, then the worry/damage of taking out multiple payday loans is reduced.

    A cap on the amount of interest charged per £100. £20 per £100 I think should be the cap.

    Remove fees for sending the money to you that day. A payday loan company recently charged me £25 for this service - sending the money to me within 2 hours. I checked my online banking to see that it was sent via Faster Payments, which surely should have been free?

    Limit the amount of rollovers available. After two rollovers, the customer should be able to pay the money back over time, with no further interest added.
    Getting married to a wonderful lady on August 10, 2012.

    Need to save up, lose weight, reduce my money worries and get back to being the real me! :j
  • But these people are loan sharks. If the truth be known I have come across several unlicensed operators that offer far better rates than a many of their legal counterparts. There modus operandi is identical. They depend on people not being able to pay, all this talk about being a viable alternative to bank charges is nonsense. The figure quoted for the percentage of people who earn a certain amount and take out loans is a smoke screen; it would be much more interesting to see where the largest percentage of their profit is generated.
    The truth of this is self-evident; you only have to look at how and where they advertise to see where their real feeding ground lays
    With the greatest of respect, are you really saying that unlimited rollovers should be allowed because the debtor may not be able to repay the inflated interest they have already accrued? This is of course the way loan sharks have always operated.
    Simon
  • ConsumeristConsumerist Forumite
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    . . . all this talk about being a viable alternative to bank charges is nonsense.
    . . . in your humble opinion, of course.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • edited 5 September 2011 at 2:29PM
    simon_the_poetsimon_the_poet Forumite
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    edited 5 September 2011 at 2:29PM
    . . . in your humble opinion, of course.

    The facts seem to support my conclusion. Not saying that under certain circumstances a savvy operator may be able to use these to save a couple of quid, what I am saying is that any benefit is greatly outweighed by the harm done to the poorer and less advantaged sections of the community.
    Simon
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