MSE News: Finally! Government to cap costs of payday loans
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Even during the worst of times I hadn't succumbed to these lenders, but the biggest problem with payday lenders is not the ridiculously high interest rates and charges - but the fact that they effectively set themselves up as preferential creditors (above even your rent/mortgage, food and council tax) by setting up a Continuous Payment Authority against your debit card.
What the government should be banning is the Continuous Payment Authority for PDL companies (or at least limiting the number of allowed attempts) - maybe that would then focus the lenders minds on who they are prepared to lend to.
At the moment they'll lend to anyone with a pulse because they know there will be available funds at some point that they can grab.
Even the banks with their right of set off have to give notice that that's what they will do AND take into account all your regular commitments before they do so.
Personally, I would like it to be mandatory that anyone who applies for these loans must be made to write out and submit a full budget before a loan can be granted just so they can see that they really can't afford to repay it (but of course it won't happen).0 -
GazHatesBanks wrote: »Personally, I would like it to be mandatory that anyone who applies for these loans must be made to write out and submit a full budget before a loan can be granted just so they can see that they really can't afford to repay it (but of course it won't happen).
If they did that, though, there'd be howls of protest (many of them on here) about how unfair it was that people were being denied credit. Just look at the threads already where people ask how to appeal the terrible decision of the banks not to lend to them to "help them out" of their parlous financial condition.
I'd favour a different route, debtor's pprisons, and utter social stigma of failing to repay a debt. I think that this would quite quickly make people think twice about borrowing money unnecessarily.0 -
I susppect, if this was introduced, that you'd rapidly see banks simply refusing to allow any payments that resulted in an unauthorised overdraft, followed by accounts being closed.
The banks can and always have had the ability to refuse to honour a payment that would take you into 'unauthorised overdraft', they just CHOOSE not to. Lloyds for instance offer a basic account with no overdraft facility, but for an extra £10 a month (thieves) they can 'guarantee' that you wont ever go into unauthorised overdraft by rejecting any payment that would send you there. What I dont understand is why you can even go into 'unauthorised' overdraft on an account that doesnt even HAVE an overdraft arranged! This is the real iniquity and needs looking at closely in my opinion.
Yes, PDLs charge interest, but if you borrow a small amount over a short period (1 to 30 days) you are looking at around the 25% mark which is damned sight more reasonable than 'unauthorised' overdraft fees.
Everyone has jumped on the 'lets hang the PDLs' without stopping to think that a) APR = ANNUAL percentage rate, b) 25% isnt all that bad and c) like abortions, if you criminalise it, it goes underground. The demand doesnt disappear just because you make something illegal.
The real problem is lack of money management skills and the government would do far better to make financial studies a compulsory and large part of the curriculum. Of course, it used to be, it was called 'home ec' but was removed on the basis that it was sexist and demeaning for girls to learn all about running a household, budgeting, mending and cooking.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.
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It's all very well asking for financial education, and it certainly won't do any harm, even though historically financial matters were probably learnt more through the family. The problem is that the pdl customers, and all those others who manage credit poorly, are predominantly the people who don't learn english, maths, physics etc so the actual impact would be minimal. Not saying it's not worth trying but would have to be combined with a large dose of personal responsibility which isn't a popular tipple.0
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I'd favour a different route, debtor's pprisons, and utter social stigma of failing to repay a debt. I think that this would quite quickly make people think twice about borrowing money unnecessarily.
Would this wonderful scheme of yours extend to politicians and insolvent bankers or is it just a rule for the lesser beings?'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0 -
Would this wonderful scheme of yours extend to politicians and insolvent bankers or is it just a rule for the lesser beings?
Wow, you think people are "greater" or "lesser" based on jobs?
That's messed up.
But yes, I think it'd be a good idea for everyone, why on earth would I think otherwise?
Do you actually know any insolvent bankers, though? We don't tend to borrow, in my experience, as we know that job security is close to nonexistent. As I've pointed out on here before, you should not borrow if you aren't certain that you can pay it back.0 -
Nice swerve, would this debtors prison extend to individuals who've exhibiting similar behaviour through a corporate entity then, as it does in the case of sole traders and would it not be prudent to link personal assets of those running a business and acquired through it to the business itself in the event of insolvency?'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB0
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One of my biggest concerns surrounding Pay Day Loan companies (Apart from the fact I am still digging myself out of that hole) is their conduct once you have defaulted.
I understand that the T&C's clearly state the penalty charges, but with all of them I contacted only one behaved in what I would term money grabbing behaviour.
When I initially contacted the companies and made token payments all of them stopped adding charges and interest and froze the account while Step Change took over for me with the exception of one bunch of old puppets. They continued to apply the daily charge for 30 days which resulted in my account going from an initial £500 loan to over £1500. They then sent this onto a debt collector.
I believe that type of practice is what needs to change in addition to the cap on interest charges etc. There has to be a happy medium to this
Sorry, rant over! To add I have less than 18 months to go - hopefully sooner0 -
Of course soon martin lewis will be tweeting on about how terrible it is that people have got nowhere to turn to borrow money and how awful it is that families are in hock to sharks..
The 'crims' will be getting their thousands out from under the bed to lend out.
When will the well meaning middle class learn that you can't legislate for stupidity, no matter what you do?0 -
Of course soon martin lewis will be tweeting on about how terrible it is that people have got nowhere to turn to borrow money and how awful it is that families are in hock to sharks..
The 'crims' will be getting their thousands out from under the bed to lend out.
When will the well meaning middle class learn that you can't legislate for stupidity, no matter what you do?
Sealion - I dont' think it's just the well meaning "middle class" who are shocked and appalled by this state of affairs, nor do I think it is just the poor who take out payday loans.
Financial situations can, and do affect a whole range of people but this is about the practices of unscrupulous companies who prey on causing further misery without any valid checks.
Sure loan sharking has been around for many a century, but are you saying we just do nothing? I pride myself on caring for people and the situations - I may not be able to help them all, but helping at least one, either through advice or other channels makes my world seem a little brighter0
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