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  • FIRST POST
    • MSE Guy
    • By MSE Guy 29th Jul 09, 5:56 PM
    • 1,628Posts
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    MSE Guy
    MSE news: The loan firm that charges 2,400% interest
    • #1
    • 29th Jul 09, 5:56 PM
    MSE news: The loan firm that charges 2,400% interest 29th Jul 09 at 5:56 PM
    This is the discussion thread for the following MSE News Story:

    "Indebted consumers are being lured into agreeing loans with annual interest rates of well over 2,000%.

    Firms that offer 'payday loans' levy these huge charges on borrowing up to £1,000, and often target those short on cash ..."





Page 1
  • talana
    • #2
    • 29th Jul 09, 6:11 PM
    • #2
    • 29th Jul 09, 6:11 PM
    Hardly news surely? :confused:
    On this very board there are many discussions about payday loan companies with similar rates.

    "Indebted consumers are being lured......
    "Lured" suggests something underhand. How exactly are they being lured?

    For what its worth, as long as the companies are up-front with their rates and don't try to hide them then I can't really see the problem.
    eg if they advertise clearly that they charge 2400%, then the consumer can choose to accept that or go elsewhere.
  • esmerellda
    • #3
    • 29th Jul 09, 6:59 PM
    • #3
    • 29th Jul 09, 6:59 PM
    Or there are crisis and budgeting loans interest free available to people on benefits (max £1500) from the social fund. Easy to apply, repayments taken at source and receive the money within a few days.

    Payday loans seem like a good idea at the time, no one ever thinks they will get trapped in the extension spiral, but they do.

    I wonder actually if there are surveys about showing for what purpose people take out these payday loans ? I suspect a number are to pay off bailiffs or debt collectors who are causing grief - in which case a bit mroe education of peoples rights and a tad more clamping down on unsavoury practises by DCas wouldnt go amiss.
    Last edited by esmerellda; 29-07-2009 at 7:01 PM.
    LegalBeagles
    • wizk1
    • By wizk1 29th Jul 09, 8:20 PM
    • 901 Posts
    • 609 Thanks
    wizk1
    • #4
    • 29th Jul 09, 8:20 PM
    • #4
    • 29th Jul 09, 8:20 PM
    I dislike these companies with a passion, but I rather like PayDayUK, seeing as they offered £60 as Quidco cash back once upon a time, to take out my first (and only) loan. As a result, I managed to screw them out of £40.

    Savvy money saver........ 1
    Faceless loan shark co... 0

    • marshallka
    • By marshallka 29th Jul 09, 8:34 PM
    • 14,494 Posts
    • 20,661 Thanks
    marshallka
    • #5
    • 29th Jul 09, 8:34 PM
    • #5
    • 29th Jul 09, 8:34 PM
    Do these firms actually get a CCL to trade in finance and if so where are the regulators that are supposed to protect people like this. I cannot understand how they are allowed to trade myself. It makes me so angry cause this is PURE GREED from total vultures. How anyone can call a 2000% APR fair i will never know. Surely if an agreement is drawn up then FOS can get involved in cases like this as they are allowed to now look into consumer credit taken out from April 2007. I realise that people have choices and anyone actually taking these loans must not be of sound mind at the time if you ask me or very desperate and vulnerable. It just should not be allowed in the first place.
    Last edited by marshallka; 29-07-2009 at 8:40 PM.
  • talana
    • #6
    • 29th Jul 09, 9:20 PM
    • #6
    • 29th Jul 09, 9:20 PM
    I realise that people have choices and anyone actually taking these loans must not be of sound mind at the time if you ask me or very desperate and vulnerable. It just should not be allowed in the first place.
    Originally posted by marshallka
    Fair enough, I can understand that viewpoint.
    But what alternative are you suggesting for those consumers who take out these loans?
    If these payday loan companies are prevented from charging high APR (as an aside, what would you consider to be a fair APR for such a loan?), then they'll simply cease trading in the end. Good, you might think!
    But where then for a short-term loan for many of these consumers?
    The demand will still be there, and the hole will partly be filled by the illegal loan sharks who are even worse.
    • ~Brock~
    • By ~Brock~ 29th Jul 09, 9:21 PM
    • 1,600 Posts
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    ~Brock~
    • #7
    • 29th Jul 09, 9:21 PM
    • #7
    • 29th Jul 09, 9:21 PM
    Usual case of concentrating on the headline without looking at the substance.

    The acticle clearly explains why the rates are so high - the loans are for short terms but the rates, by law, are annualised.

    Why is this always so difficult to understand?

    As for the guy from Barnardos - I find people like that so patronising. Is he saying that 'these' people (who are 'these people' exactly?) should not be allowed to borrow money? Is he offering to lend these 'poor' people his own money instead? No of course he isn't!

    You can be sure, however, that these 'poor' people would still need to borrow money even if Dr Barnardo got his own way and had these companies shut down. Trouble is, they would be borrowing from people who don't give a to$$ about the law. Which would you prefer?
    • marshallka
    • By marshallka 29th Jul 09, 9:25 PM
    • 14,494 Posts
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    marshallka
    • #8
    • 29th Jul 09, 9:25 PM
    • #8
    • 29th Jul 09, 9:25 PM
    Usual case of concentrating on the headline without looking at the substance.

    The acticle clearly explains why the rates are so high - the loans are for short terms but the rates, by law, are annualised.

    Why is this always so difficult to understand?

    As for the guy from Barnardos - I find people like that so patronising. Is he saying that 'these' people (who are 'these people' exactly?) should not be allowed to borrow money? Is he offering to lend these 'poor' people his own money instead? No of course he isn't!

    You can be sure, however, that these 'poor' people would still need to borrow money even if Dr Barnardo got his own way and had these companies shut down. Trouble is, they would be borrowing from people who don't give a to$$ about the law. Which would you prefer?
    Originally posted by ~Brock~
    Brock I did read the article and still find the APR (short or long term) too much in my eyes. Perhaps i do not understand it properly either. I do however understand what you are saying here.
    • ~Brock~
    • By ~Brock~ 29th Jul 09, 9:37 PM
    • 1,600 Posts
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    ~Brock~
    • #9
    • 29th Jul 09, 9:37 PM
    • #9
    • 29th Jul 09, 9:37 PM
    marshalka I wasn't referring to you love, I was talking about the general journalistic sensationalism that this type of business attracts, when even the OFT themselves have acknowledged in the past that the APR virtually useless in such circumstances.

    The CAB made a supercomplaint to the OFT some years ago about short term weekly collected loans, called Debt on our doorstep. One of their biggest gripes was 'excessive APR's' The OFT did their investigation and then the whole thing was eventually referred to the Competition Commission.

    It is interesting to note that the resultant solutions included plenty of requirements for lenders to share data with CRA's and make it easier to compare products etc, but NOTHING was done to make them change their interest rates. So, after a two year detailed investigation, during which the OFT and the CC studied carefully the business models of such companies. they did not make any recommendation to lower or cap rates. Does that not tell you something?
    • PBA
    • By PBA 30th Jul 09, 3:01 AM
    • 1,508 Posts
    • 516 Thanks
    PBA
    While the average consumer might feel this sort of rate is abhorrent, as a rule lenders price to risk. This kind of lending is inherently a high risk, so the interest rate must be high. I agree wholehartedly with other posters, any suggestion that rates should be capped will only allow sharks to enter the market, who might have far more ruthless methods for collecting payment than any legit company.
    • michaels
    • By michaels 30th Jul 09, 4:36 AM
    • 22,512 Posts
    • 103,507 Thanks
    michaels
    Was thinking of doing this but thought it might look a bit poor on my credit file

    I dislike these companies with a passion, but I rather like PayDayUK, seeing as they offered £60 as Quidco cash back once upon a time, to take out my first (and only) loan. As a result, I managed to screw them out of £40.

    Savvy money saver........ 1
    Faceless loan shark co... 0

    Originally posted by wizk1
    Cool heads and compromise
    • PROLIANT
    • By PROLIANT 30th Jul 09, 7:28 AM
    • 6,045 Posts
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    PROLIANT
    Solution - Don't use these companies, starve them of their life blood - your money and then simply watch them fold.
    Of course it would be too much to ask our pathetic attempt of a government to ban these companies from trading wouldn’t it?
    Since when has the world of computer software design been about what people want? This is a simple question of evolution. The day is quickly coming when every knee will bow down to a silicon fist, and you will all beg your binary gods for mercy.
    • wizk1
    • By wizk1 30th Jul 09, 8:31 AM
    • 901 Posts
    • 609 Thanks
    wizk1
    Was thinking of doing this but thought it might look a bit poor on my credit file
    Originally posted by michaels
    If anything, it should have the opposite effect. Having some form of credit, paid on time is better than no credit history at all.
  • ILW
    Solution - Don't use these companies, starve them of their life blood - your money and then simply watch them fold.
    Of course it would be too much to ask our pathetic attempt of a government to ban these companies from trading wouldn’t it?
    Originally posted by PROLIANT
    There is a place for these types of loans as long as they are used as intended (less than a month). I think the government spend too much time and effort dictating what people are and are not allowed to do.
    • PROLIANT
    • By PROLIANT 30th Jul 09, 10:07 AM
    • 6,045 Posts
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    PROLIANT
    There is a place for these types of loans as long as they are used as intended (less than a month). I think the government spend too much time and effort dictating what people are and are not allowed to do.
    Originally posted by ILW
    I whole heartedly disagree; there is no place for loan sharking, pawn shops and similar business models, it is too easy for people who are refused bank loans, credit cards and overdrafts to use these shysters and end up in deep trouble.

    What the government should do is offer low interest loans i.e. like the DWP Crisis loans to working people irrespective of their credit history.
    This would solve so many problems and help so many genuine unfortunate people.
    Since when has the world of computer software design been about what people want? This is a simple question of evolution. The day is quickly coming when every knee will bow down to a silicon fist, and you will all beg your binary gods for mercy.
    • nomoneytoday
    • By nomoneytoday 30th Jul 09, 10:30 AM
    • 4,764 Posts
    • 2,881 Thanks
    nomoneytoday

    What the government should do is offer low interest loans i.e. like the DWP Crisis loans to working people irrespective of their credit history.
    This would solve so many problems and help so many genuine unfortunate people.
    Originally posted by PROLIANT
    Sorry, but I disagree.
    If the government will offer cheap loans regardless of history, what incentive is there for people to pay back their original debts?
    • PROLIANT
    • By PROLIANT 30th Jul 09, 10:37 AM
    • 6,045 Posts
    • 5,599 Thanks
    PROLIANT
    Sorry, but I disagree.
    If the government will offer cheap loans regardless of history, what incentive is there for people to pay back their original debts?
    Originally posted by nomoneytoday
    The subject needs further elaboration/discussion before negatives can be written.
    Ideas?
    Since when has the world of computer software design been about what people want? This is a simple question of evolution. The day is quickly coming when every knee will bow down to a silicon fist, and you will all beg your binary gods for mercy.
  • ILW
    These massive APRs quoted are very misleading.
    As has been quoted many times before, if I were to lend a mate a tenner and he paid me back tomorrow and bought me a pint, the APR would be someting like 10,000%
    Sort term loans are fine as long as people do not abuse them and they know what they are getting into.
    • Jennifer_Jane
    • By Jennifer_Jane 30th Jul 09, 12:40 PM
    • 3,157 Posts
    • 4,365 Thanks
    Jennifer_Jane
    Was thinking of doing this but thought it might look a bit poor on my credit file
    Originally posted by michaels
    I understand from the Quidco thread (on this Board) about Pay Day UK, that no credit check was done - just an ID Footprint (am still unsure what this is, but anyway, no credit check).

    They ran this Quidco promotion last year and people seemed to have no hassle (providing they did everything correctly), I've done it too.

    If you were in danger of having your direct debits rejected for the sake of £100 or so, then perhaps this would be a useful thing as a very temporary measure. Especially with the Quidco cashback which was £65 when I took this out (£80 loan; repay £100 next payday ie August; Quidco £65: profit £45)

    Jen
    x
  • Snakeeyes21
    These massive APRs quoted are very misleading.
    As has been quoted many times before, if I were to lend a mate a tenner and he paid me back tomorrow and bought me a pint, the APR would be someting like 10,000%
    Sort term loans are fine as long as people do not abuse them and they know what they are getting into.
    Originally posted by ILW
    If he paid you back after a week its around 28000% apr, after a day itll be over 150000% apr, but it is a great example to show how inflated the apr becomes when dealing with short term lending.
    but a apr of 2400% makes a good headline, even if it is misleading.
    i would have expected better reporting from MSE guy.
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