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  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 2nd Jan 13, 1:08 PM
    • 2,324Posts
    • 971Thanks
    Former MSE Helen
    MSE News: Stella Creasy: Action needed NOW on payday lenders
    • #1
    • 2nd Jan 13, 1:08 PM
    MSE News: Stella Creasy: Action needed NOW on payday lenders 2nd Jan 13 at 1:08 PM
    "The Labour MP demands greater policing of 'legal loan sharks' in the window before tougher regulation comes into force..."

Page 1
    • Rafter
    • By Rafter 2nd Jan 13, 3:05 PM
    • 3,837 Posts
    • 1,366 Thanks
    Rafter
    • #2
    • 2nd Jan 13, 3:05 PM
    • #2
    • 2nd Jan 13, 3:05 PM
    Stella,

    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 months income at time of application - any lender who didn't adequately check affordability or who lent over this limit would have the amount over the limit written off.

    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.
    Smile , it makes people wonder what you have been up to.
    • UsetheFORCE
    • By UsetheFORCE 2nd Jan 13, 3:08 PM
    • 662 Posts
    • 212 Thanks
    UsetheFORCE
    • #3
    • 2nd Jan 13, 3:08 PM
    • #3
    • 2nd Jan 13, 3:08 PM
    Not a problem with costs within a loan term.

    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!!!
    I have numerous qualifications in Business and Finance, Accountancy, Health and Safety and am now studying Law.

    Don't rely on anything I write as it may be wrong!!!
    • callum9999
    • By callum9999 2nd Jan 13, 3:13 PM
    • 3,950 Posts
    • 2,408 Thanks
    callum9999
    • #4
    • 2nd Jan 13, 3:13 PM
    • #4
    • 2nd Jan 13, 3:13 PM
    I'm always torn on this issue. What exactly are the people who genuinely need the loan, but because of the capped interest etc. can't now get it, meant to do? It seems slightly unfair to penalise them because of other people being irresponsible (you can't lend irresponsibly if someone isn't trying to borrow irresponsibly...).

    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).
    Last edited by callum9999; 02-01-2013 at 3:15 PM.
  • ILW
    • #5
    • 2nd Jan 13, 3:17 PM
    • #5
    • 2nd Jan 13, 3:17 PM
    Guess it will be good news for the illegal legbreakers.

    Are there really people out there that do not realise that Payday loans are very expensive if carried beyond the term?
    • UsetheFORCE
    • By UsetheFORCE 2nd Jan 13, 3:19 PM
    • 662 Posts
    • 212 Thanks
    UsetheFORCE
    • #6
    • 2nd Jan 13, 3:19 PM
    • #6
    • 2nd Jan 13, 3:19 PM
    I'm always torn on this issue. What exactly are the people who genuinely need the loan, but because of the capped interest etc. can't now get it, meant to do? It seems slightly unfair to penalise them because of other people being irresponsible (you can't lend irresponsibly if someone isn't trying to borrow irresponsibly...).

    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).
    Originally posted by callum9999
    I don't have a problem with the high APR, so long as it is kept to the loan term only...
    I have numerous qualifications in Business and Finance, Accountancy, Health and Safety and am now studying Law.

    Don't rely on anything I write as it may be wrong!!!
    • UsetheFORCE
    • By UsetheFORCE 2nd Jan 13, 3:20 PM
    • 662 Posts
    • 212 Thanks
    UsetheFORCE
    • #7
    • 2nd Jan 13, 3:20 PM
    • #7
    • 2nd Jan 13, 3:20 PM
    Guess it will be good news for the illegal legbreakers.

    Are there really people out there that do not realise that Payday loans are very expensive if carried beyond the term?
    Originally posted by ILW
    Why even have a term then? You might as well have it as a revolving credit facility!
    Last edited by UsetheFORCE; 02-01-2013 at 3:23 PM.
    I have numerous qualifications in Business and Finance, Accountancy, Health and Safety and am now studying Law.

    Don't rely on anything I write as it may be wrong!!!
  • ILW
    • #8
    • 2nd Jan 13, 3:28 PM
    • #8
    • 2nd Jan 13, 3:28 PM
    Why even have a term then? You might as well have it as a revolving credit facility!
    Originally posted by UsetheFORCE
    So are you saying the interest rate should drop if the loan is not repaid as per the contract?

    That would make no sense at all.
    • UsetheFORCE
    • By UsetheFORCE 2nd Jan 13, 3:39 PM
    • 662 Posts
    • 212 Thanks
    UsetheFORCE
    • #9
    • 2nd Jan 13, 3:39 PM
    • #9
    • 2nd Jan 13, 3:39 PM
    So are you saying the interest rate should drop if the loan is not repaid as per the contract?

    That would make no sense at all.
    Originally posted by ILW
    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!
    Last edited by UsetheFORCE; 02-01-2013 at 3:46 PM.
    I have numerous qualifications in Business and Finance, Accountancy, Health and Safety and am now studying Law.

    Don't rely on anything I write as it may be wrong!!!
  • Apples2
    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
    Originally posted by UsetheFORCE
    So if you agree to borrow 100 repaying 125 a couple of weeks later, you may as well not bother repaying anything until you get another job, win the lottery or whatever safe in the knowledge your balance will remain static?
  • ILW
    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!
    Originally posted by UsetheFORCE
    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.
    • Rafter
    • By Rafter 2nd Jan 13, 4:08 PM
    • 3,837 Posts
    • 1,366 Thanks
    Rafter
    I'm always torn on this issue. What exactly are the people who genuinely need the loan, but because of the capped interest etc. can't now get it, meant to do? It seems slightly unfair to penalise them because of other people being irresponsible (you can't lend irresponsibly if someone isn't trying to borrow irresponsibly...).

    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).
    Originally posted by callum9999

    Callum,

    I wasn't suggesting that banks should be forced to offer a c. 200 emergency buffer to all. But to those customers to whom they would historically have offered a unauthorised overdraft, they should as part of their privileged position as guardians of the financial system offer access to very short term funds before a customer has to go to either a loan shark, government or charity for an emergency hand out.

    R.
    Smile , it makes people wonder what you have been up to.
    • UsetheFORCE
    • By UsetheFORCE 2nd Jan 13, 4:39 PM
    • 662 Posts
    • 212 Thanks
    UsetheFORCE
    So if you agree to borrow 100 repaying 125 a couple of weeks later, you may as well not bother repaying anything until you get another job, win the lottery or whatever safe in the knowledge your balance will remain static?
    Originally posted by Apples2
    Did I write that? Clearly your credit file will be damaged so if you don't repay and so logically anyone else wouldn't touch you with a bargepole in the next few years. If you don't even repay 100 as agreed then you don't deserve to be offered credit!
    Last edited by UsetheFORCE; 02-01-2013 at 4:51 PM.
    I have numerous qualifications in Business and Finance, Accountancy, Health and Safety and am now studying Law.

    Don't rely on anything I write as it may be wrong!!!
    • UsetheFORCE
    • By UsetheFORCE 2nd Jan 13, 4:47 PM
    • 662 Posts
    • 212 Thanks
    UsetheFORCE
    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.
    Originally posted by ILW
    If it clearly recorded that you haven't paid a short term lender back then the reward should be no CREDIT at all for the next few years.

    If a company takes the risk and it doesn't pay off then tough! I will leave you all to discuss it, I really do think some people have too much sympathy for these companies.

    Mainstream loan companies have defaulting customers but don't resort to charging these ridiculous rates once you have defaulted! Don't have a term if you effectively want to have an open ended term anyway!!!
    Last edited by UsetheFORCE; 02-01-2013 at 4:51 PM.
    I have numerous qualifications in Business and Finance, Accountancy, Health and Safety and am now studying Law.

    Don't rely on anything I write as it may be wrong!!!
  • Apples2
    Did I write that? Clearly your credit file will be damaged so if you are so logically anyone else wouldn't touch you with a bargepole in the next few years.
    Originally posted by UsetheFORCE
    Which is why these people approached Payday Lenders in the first place. That horse has already bolted.

    Who on Earth would take out a payday loan if there were other options (aside from those grabbing the cashback recently)?
  • Apples2
    Don't have a term if you effectively want to have an open ended term anyway!!!
    Originally posted by UsetheFORCE
    Are we going around in circles here?

    The lender DID have a term and was prepared to stick to it. It was the BORROWER who decided he was going to make it an open ended term.
  • Wywth
    We must be vigilant in keeping up the fight to end legal loan sharking in 2013.
    Exactly - they are killing the illegal loan shark industry that so many would otherwise be forced to rely on

    DC is correct - that lot should not be allowed to govern this country, not with their present incoherent policies.
    • shadowspy24
    • By shadowspy24 2nd Jan 13, 6:25 PM
    • 232 Posts
    • 118 Thanks
    shadowspy24
    If people take out a payday loan to pay a bill, surely it would be cheaper to not pay the bill for a month until you get the money and incur their late payment fee which would probably be a pittance compared to the payday company's interest rate. Hell, you could put off paying the bill for a lot longer and incur multiples late payment fees and it would still be cheaper than 1 month of interest from these loan sharks.
    • callum9999
    • By callum9999 2nd Jan 13, 6:39 PM
    • 3,950 Posts
    • 2,408 Thanks
    callum9999
    Callum,

    I wasn't suggesting that banks should be forced to offer a c. 200 emergency buffer to all. But to those customers to whom they would historically have offered a unauthorised overdraft, they should as part of their privileged position as guardians of the financial system offer access to very short term funds before a customer has to go to either a loan shark, government or charity for an emergency hand out.

    R.
    Originally posted by Rafter
    Oh I see, but is that not exactly how it is already? I thought basic accounts don't let you go overdrawn (unauthorised or not). If you want a 200 buffer and the bank would be willing to give it to you, then get a normal account.
    • Treadmill
    • By Treadmill 2nd Jan 13, 7:10 PM
    • 1,069 Posts
    • 974 Thanks
    Treadmill
    The Barclays reserve facility charge is 22 for 5 days use, so you could potentially be charged 110 for 25 days of being into your reserve by 100, this sort of thing also needs to be looked at, advice to anyone with Barclays. Cancel the reserve facility.

    All this talk of 'contracts' like they are the holy grail is silly. Just because something is written in a contract that doesn't automatically make it fair or legal, hence every Mis selling scandal that ever happened.

    I personally am looking forward to when another group of sharks, the claim type start claiming back fees for Payday loan defaults and penalty interest on a no win no fee basis as will inevitably happen.
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