MSE News: Stella Creasy: Action needed NOW on payday lenders
Former_MSE_Helen
Former MSE 2.4K Posts
in Loans
"The Labour MP demands greater policing of 'legal loan sharks' in the window before tougher regulation comes into force..."
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Couldn't agree more with this campaign. The sky high cost of borrowing for pay day loans (and to be fair some authorised and unauthorised overdraft charges) is a burden on society and has zero social value as a business activity.
My simple rules would be:
1) to cap any lending activity so that the maximum you can pay back over a 12 month period with the same lender would be twice what you have borrowed with a maximum 'fee' included of <£12 for setting up the original credit agreement/ searches/ fraud checks and paperwork.
2) Cap the total amount of unsecured credit that any individual can have at
3) Give consumers the default option of a current account which does not go over limit with a maximum £1 charge per item that is rejected to cover any administration costs with an emergency buffer of £200 that can only be activated by contacting the bank or going online.
I believe that the combination of these would dramatically curtail the worst industry excesses and the problems caused by easy credit and debt that are a burden on society as a whole.
Good luck with your campaign.
R.
A payday loan is a short term emergency loan so quite frankly people shouldn't be allowed to have more than 1 or 2.
The total cost should end at the end of the loan term bar reasonable costs necessary to recover the debt plus say statutory interest (8%).
It is amazing how many people have a £100 loan that becomes multipled many times in a short period of time...
Legalised loan sharks indeed are some of these companies!!!
Don't rely on anything I write as it may be wrong!!!
While this has reached the point where something really should be done, "protecting" the people who wreck their own finances always comes to the detriment of someone else, so you need to be careful how it's done. Saying that, the suggestions given in the first post seem pretty reasonable to me (except for the last point - it's both unfair, and quite possibly illegal, to force banks to give overdrafts to everyone).
Are there really people out there that do not realise that Payday loans are very expensive if carried beyond the term?
I don't have a problem with the high APR, so long as it is kept to the loan term only...
Don't rely on anything I write as it may be wrong!!!
Why even have a term then? You might as well have it as a revolving credit facility!
Don't rely on anything I write as it may be wrong!!!
That would make no sense at all.
Of course it should, the contractual interest rate should apply to the loan term only. Anyway, I don't even consider it interest as such, more a service charge for providing a short term loan.
You make a business decision to lend to someone, if it turns sour then tough!!! You shouldn't be allowed to attempt to extract ridiculous sums off people, only the principal. charge, reasonable costs to recover and a little interest.
So when someone is lent a 3rd, 4th, 5th concurrent 'payday loan'.... I have no sympathy for the lender, clearly no proper checks, make a little lack of information as well.
Reckless borrowing but then it wouldn't be if it wasn't reckless lending in the first place! These companies are either ignorant or they can easily conclude that the borrower is in the ****, I have little sympathy for them!
Don't rely on anything I write as it may be wrong!!!
That really makes no sense.
In effect, the longer someone strings out repaying, the cheaper the money would get.
Bear in mind that people who take out payday loans are the ones who cannot get credit from mainstream lenders.