It's no secret that the payday loans industry has over the last decade or so not enjoyed the best reputation around. There are more than a few people, including politicians, the Archbishop of Canterbury and many others who have vented their frustration and grievances at an industry that many see as 'shady' and 'not to be trusted.'
However, in recent years, the payday and short term loans industry has been clamped down on. The Financial Conduct Authority (FCA), who are tasked with regulating and guiding the financial and lending sectors have taken a bold step. There are now a series of regulations for all payday lenders and those who previously had a free reign at the market and prospective borrowers.
Things are Improving for Borrowers and Lenders
The previous way of doing things was that these lenders (many of whom at the time were very unscrupulous) would lend money to customers without performing any credit, affordability or financial checks upon borrowers. This led to many people in the UK becoming trapped in what has become known as the 'cycle of debt.' This meant that the high interest rates of short term and payday loans were applied along with charges and fees for missing scheduled payments.
A loan of a few hundred pounds on that basis, could then spiral out of control and end up costing more than a few thousand pounds with all factors and repayments taken into account.
Things today are different though and there have been a number of important changes, implemented by the FCA to ensure that customers are protected from lenders who cannot be trusted. This new regulation though also ensures that lenders are protected from potential customers who don't have the means by which to repay.
What are the New Regulations?
The regulations introduced and now in effect are as follows:
What Does All This Mean?
Taking one short term loan provider as an example, the regulations mean the following:
On a loan of £300 over a 5 month repayment period, a borrower would repay £101.03 per month. This takes the total payable amount to £505.13, with an annual interest rate (fixed) of 290% (trueblueloan.co.uk).
This takes into account the FCA's regulations, ensuring that no more than 0.8% interest is charged per day and the loan amount repayable will never be more than double the amount borrowed.
All in all, things are looking brighter in 2017 for the lending industry and its customers.
Add a Comment