Since January 2015 the cap is on, and perhaps we start to say goodbye to payday – what now?

As the Financial Conduct Authority (FCA), Ombudsman, and Competition Markets Authority (CMA) took it between them to cap the payday industry, few legitimate payday companies have survived.

Reminiscent of the old medieval torture the screw are being tightened once again. The CMA is now demanding that payday lenders provide competitive information to their customers on other companies both online and off before the customers decided what loan to choose. The payday loan company must be completely transparent about all transactions, all charges, and how much interest they choose to charge.

We can officially say goodbye to payday and welcome the most honest bank in the world to the streets of the UK. There is not one bank, building society, or credit union that is nearly as honest as what is being expected from the payday companies. In fact maybe they should be dubbed “giveaway”?

As we say goodbye to payday: The demands or the CMA and FCA

The CMA feels that the actions that it has taken in the last year are legitimate. Among those are:

  • Transparency in the terms and conditions of short term loan
  • Comparison websites
  • Complete transparency in application of how much the loan will cost, and fees that will be incurred, and exactly how much will need to be paid back
  • Crackdown on the middlemen and other shady operators that con customers
  • Crackdown on lead generators who pose as companies trying to find the best payday deal for customers

Praise for the CMA, as we say goodbye to payday and the dark years of exploiting the poor

The CMA’s proposals have been deemed as a responsible way to tackle and improve the payday sector and the transparency that has been so long awaited. According to the CMA, light shone into the dark corners is the best remedy towards cleaning up a messy situation. The CMA, along with the FCA, had wanted to clean up the payday sector, when payday lenders first started cashing cheques for people who had no bank account, in the 1990’s.

Since April last year we have seen some of the giants of the payday industry change their policies to conform to the new regulations, but this does not seem to be enough. The FCA seems to be smug as it announces that 90% of the industry will close down due to the new regulation

Now where do the people who needed payday go?

For all intents and purposes, if 90% of the payday industry disappears, where does 90% of the demand go? What is the problem with our politicians? Can they not think? If we say goodbye to payday, where do the customers of payday go? According to the Consumer Finance Association as the payday loan sector falls, the demand for payday loans does not. Unfortunately, for those who live in poverty and are desperate, the next place to turn will be the loan shark. That means that the pond is going to fill up with predators that the FCA, CMA, and Ombudsman have no way of capping, controlling or putting out of business. Now it’s Scotland Yard that will have to do the talking.