MSE News: MP renews call for cap on payday loan costs

edited 30 November -1 at 1:00AM in Loans
25 replies 3.3K views
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  • JimmyTheWigJimmyTheWig Forumite
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    Apples2 wrote: »
    Give us a real life figure which YOU think is acceptable to borrow £100 for 7 days?
    The problem comes when you turn a sensible figure for this into an APR (which I agree is going to give an unreasonable sounding APR even for a reasonable charge) and then apply the same APR to a longer period if the borrower can't repay as planned.
  • What would YOU charge for this, ... ?
    About the same as I expect I might charge for selling my body for sex? I'd discount the Consumer Credit license bit - anyone can get one of those, but I really couldn't see myself doing either - it's a culture thing perhaps? Moneylending isn't an honorable business is it?
  • CHR15CHR15 Forumite
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    Moneylending isn't an honorable business is it?

    There are a thousand posts in this forum alone from people who considered it entirely honorable when they were applying & spending the money.

    It only becomes dishonerable when those nasty sharks expect the repayments.
  • brassobrasso Forumite
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    About the same as I expect I might charge for selling my body for sex?

    :huh:

    Sometimes, forum posts really need photos to make their point understood....
    "I don't mind if a chap talks rot. But I really must draw the line at utter rot." - PG Wodehouse
  • I am not sure why you think a usury of 25% is not bad (or perhaps not indecent?).

    Because of the short term nature of someone giving you cash that you need right now when no one else does - that £25 per £100 has to then pay someones wages and the insurance for high risk loanees and give a bit of profit to the company who are supplying it.

    People dont loan money out of the good of their heart - they do it for profit and if your regular lender with low interest rates thinks you're too much of a risk then the higher % you should pay, should, imo, reflect this.

    If you cant put a fair figure on what you think the rate should be rather then your body then the rest of your discussion is worthless.
    "If you no longer go for a gap, you are no longer a racing driver" - Ayrton Senna
  • psyman17psyman17 Forumite
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    The problem here isnt the initial £25 per £100 charge - its the fact that these loans are allowed to roll over indefinately, adding £25 per £100 each month without actually paying any of the original loan back. For people on a low income its far too easy to fall into the trap of taking out another payday loan to pay for the previous one & before you know it the interest payments alone are taking up more than they can afford & the the amount owed isnt going down.
  • JimmyTheWigJimmyTheWig Forumite
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    Apples2 wrote: »
    What would YOU charge for this
    About the same as I expect I might charge for selling my body for sex?
    I think that 2sides' point is that lending money for interest is something that they just wouldn't do. The same as they wouldn't sell their body for sex.

    Fair enough.

    So lets rephrase the question. 2sides, what do you think would be a reasonable amount for a company to charge someone to borrow £100 for 7 days?
    You mentioned 8% earlier. Is that what you see as a reasonable maximum? Is that 8% APR or 8% total interest?
  • Well I am for interest rates always being quoted as APR.

    I am not sure the Romans did, but either way I reckon "8%" is as much a disincentive for "companies" who wish to become moneylenders as it is for people who think they really need £100 now. Anyone who really needs £100 now in the UK needs to learn how to beg or turn up at the correct soup kitchen.

    We don't want them to get the idea that wanting £100 now is a normal vocation which they solve (for now) by pressing the buttons on their £500 iphone, now do we?

    I always reckon that any APR interest charge that is over double-digits is already in shark country.

    If you can't create a business that guarantees a profit without hammering customers who don't default then you don't have a business, you have a racket.
  • Mrs_ArcanumMrs_Arcanum Forumite
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    psyman17 wrote: »
    The problem here isnt the initial £25 per £100 charge - its the fact that these loans are allowed to roll over indefinately, adding £25 per £100 each month without actually paying any of the original loan back. For people on a low income its far too easy to fall into the trap of taking out another payday loan to pay for the previous one & before you know it the interest payments alone are taking up more than they can afford & the the amount owed isnt going down.

    This is the area that needs tackling. Sensible payment plans over a longer term with a more normal interest rate would be better offered than still more high interest payday loans when people have problems. After all except for a miracle lottery win or unexpected inheritance the majority who take up these loans are unlikely to have a better income in order to really pay this back.
    Truth always poses doubts & questions. Only lies are 100% believable, because they don't need to justify reality. - Carlos Ruiz Zafon, The Labyrinth of the Spirits
  • CHR15CHR15 Forumite
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    Limiting the number of PDL is a good idea in principle. The problem is their reflection on a credit file is not an instant process.
    Until they appear on the credit file, there would be no way of knowing if any have been taken recently.

    If it is considered a Fixed Sum for borrowing over a specified term i.e borrow £100 for 7 Days = £120 to repay. No mention of interest at all, just a fixed sum in addition to the amount borrowed.

    In case of default, as per a 12 Month 0% DFS Sofa deal, enter a Credit Agreement with a capped APR (e.g 40%) over a set period.
    No opportunity to Roll over and no opportunity to borrow again until it is cleared.

    Not liking the idea people need a £100 loan quickly is not the same as disputing there is a demand for it, and always will be.
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