Around the World in a Payday

Immediate payday loans are a popular form of short term loan

A new concept in credit and quick cash loans has taken the world by storm. What we know as a payday loan has become a global service as well as a corporate sector that is growing and spreading faster than weeds in a flower bed. Payday loans are a popular form of a short term loan. The allure of a payday loan is that it is approved almost instantly, there are no credit checks, and the likelihood of you finding that cash you need in your hand is much higher than borrowing money from any conventional financial institution. In fact payday loans have evolved to the point where it is possible to apply online, have the cash transferred directly into your bank account, and then when you are ready to pay the loan back, you likewise deposit the payment into the lender’s account. It runs so smoothly that you actually don’t have to interact with anyone at all.

Some of the larger payday lenders have expanded and set up shop in several countries. The concept is found primarily in Britain, Canada, USA, and Australia. Recently the payday loans concept has also launched into the South African market.

The concept of the payday loan originates from the early 20th century in the USA. This form of short term loan is an evolution of what was then called a salary loan. The concept is pretty much identical in that both loans are designed for a quick loan cash loan that will be paid back when the next pay check comes in. The difference is that back then these loans were run by criminal syndicates and the mafia and were mostly illegal.

At present payday lenders are more transparent and even willing to work alongside the authorities in giving the payday industry a better reputation and to regulate business practices.

Never the less the fire of heated controversy still blazes. In the UK the payday industry is a target of much debate. Britain is inundated with payday lenders, and getting a quick fist full of cash is very tempting for most people in an economy that is hanging on for dear life. Payday lenders in Britain are known for their aggressive advertising and intrusive collection processes. However, this did not stop 1.2 million people taking out a payday loan between 2006 and 2009, amounting to an astounding 1.2 billion pounds.

The USA is much more reserved. Payday lending is totally banned in 13 states, and regulated heavily in 37 states. Canada is much the same in that both countries put restrictions and caps on the interest that the payday companies can charge.

Australia has centralized the issue and imposes a 48% APR maximum limit across the entire country, with no exceptions.

As the payday concept infiltrates the South African market there is growing concern that the large poverty stricken segment of the population will, much like Britain, be tempted by this quick cash concept. Understanding the quick cash part and not quite aware of the consequences when one defaults on re-payment. Another issue is that South Africa has yet to impose regulations on these companies.

As long as payday lenders keep globe trotting, the debate will go along for the ride.