The latest ruling is that comparison websites will be set up so that Payday fast loan customers will be able to calculate what they will be repaying on their payday loans. The interest and costs will become transparent. The Competition and Markets Authority is now regulating the industry after it took over from the Office of Fair Trading and Competition Commission.
The Competition and Markets Authority (CMA) means business, and the Payday Loans industry has seen the screws tightened. Recently one of the largest players in the industry had their credit criteria examined and was to not only change it but to write off some 330 000 loans that should have never been given out due to unacceptable credit checks. The CMA has a plan and it’s all about bringing that industry into the so called ‘light’. There are off-shoots of the Payday Loans industry that feed off of the lucrative companies. “Lead generators” for example, work in the ‘best interest’ of the customer, shopping around the various Payday Loans companies to find the best deal for them, are also being accused of actually working for the Payday Lenders instead of the customers and selling the customer to the company that pays them the largest commission fee.
The Financial Conduct Authority also took control of regulation in the Payday Lending Sector around April last year and aims to cap interest rates and loan repayments. These actions, it warns, could put some 90 percent of payday lenders out of business. Only the giant lenders would remain and they would start looking more like their banking counterparts.
Those who are able to afford to use a payday loan as it is intended to be used, a quick, short-term loan have no problems and prefer to use this method of credit than applying for overdrafts and formal banking loans, but the problem is the demographic of those who don’t have bank accounts, struggle to pay the smallest of bills and are literally dependant on Payday loans because they have nowhere else to go.
If the Payday Loans business joins the other financial institutions when it comes to regulation, where do these people go? It seems to be a catch 22. While it doesn’t seem fair to have a significant chunk of the population that is so desperate it can only count on short term loans, or payday advance loans, to pay its bills, and then ending up in debt that is almost impossible to get out of, what happens to them when Payday is then taken away. Do the credit unions sweep in to the rescue, or does the good old loan shark step back onto the scene, teeth gleaming in this ‘so called light’?