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article imageRegulation to curb Payday loans companies

By Simon Crompton     Jan 6, 2015 in Politics
Price caps on short-term loans have begun in Great Britain and although more than 1 million borrowers can expect to see the cost of their loans decline, most of the lenders have set interest rates and fees to the maximum allowable by law.
According to the Guardian, research carried out by the consumer organization Which? prior to the Christmas holidays found that Wonga, QuickQuid, PaydayUK and MyJar had brought their fees and interest rates in line with the new law, but were charging the maximum £24 to borrow £L100 for 30 days. Default fees were set at £15, also the maximum allowable.
London Mutual credit union was the only short-term loan provider that Which? looked at that did not charge the maximum. Borrowers from London Mutual had to pay only £3 to borrow £100 for 30 days and there were no default fees for those looking for cheap beds for sale.
Richard Lloyd, executive director for Which?, said, “The regulator has clearly shown it’s prepared to take tough action to stamp out unscrupulous practices, and they must keep the new price cap under close review.”
The new rules were designed to stop exploitation of borrowers and prevent them from ever being forced to repay more than double the original loan amount. Since the Financial Conduct Authority (FCA) took over regulation of credit companies the number of personal loans and the amount borrowed has fallen by 35 percent.
Martin Wheatley, chief executive of the FCA, said, “Anyone who gets into difficulty and is unable to pay back on time, will not see the interest and fees on their loan spiral out of control – no consumer will ever owe more than double the original loan amount.”
Although the changes have affected the industry, it has not stopped high annual interest rates. Even with the changes, Wonga and QuickQuid are able to charge an annual interest rate over 1,000 percent.
Stella Creasy, Labour MP and supporter of payday loan reform, said that the default charges are still pushing households into unsupportable debt. She continued, “Little wonder despite intense scrutiny many of these firms can still make nearly three-quarters of a million pounds a week from British customers.”
More about Payday, United Kingdom, England, Payday loans
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