Reports from citizens concerning problems with payday loans are cut in half

The FCA (Financial Conduct Authority) began regulating the payday industry last year in April. After 20 months of observation and consultation, the body settled on major changes and put them into practice as of January this year. The clampdown saw payday lenders having to cap the rates that they charge. Payday companies have to keep the cap below the amount that the customer has borrowed so that the customer never has to pay back more than was borrowed. The lenders also have to follows rules such as limiting the number of roll overs, as well as not being able to take money from customer’s bank accounts. Payday loans have become tamer since January 2015 and Citizens Advice has tangible evidence to prove it. According to the charity, the number of payday loan problems that people are reporting this year is half of those reported last year. In Britain and Wales, 10,155 problems were reported to Citizens Advice between January and March 2014. This year, 2015, during the same period, only 5,554 problems with payday loans were reported. This shows a decrease of 45%, which does nothing more than validate that the industry, with the help of the FCA, is moving in the right direction.

Payday loans have become tamer since January 2015 and Citizens Advice has tangible evidence to prove it. According to the charity, the number of payday loan problems that people are reporting this year is half of those reported last year. In Britain and Wales, 10,155 problems were reported to Citizens Advice between January and March 2014. This year, 2015, during the same period, only 5,554 problems with payday loans were reported. This shows a decrease of 45%, which does nothing more than validate that the industry, with the help of the FCA, is moving in the right direction.

The FCA and Citizens Advice keep an eye on the industry

Since payday lending feel under the jurisdiction of the regulator, the FCA, the changes in the system have been much welcomed by the lenders and the consumers alike. Everyone seems to have a clearer picture of where they stand and what the product is before they make a transaction. The fall in complaints is warmly welcomed by all. However, Citizens Advice, warns that this is not yet the time to kick back and relax. Payday loans may be more contained but a “watchful eye” must still be kept on the industry. The charity points out that other high-cost credit products like, for example, logbook and guarantor loans. A logbook loan is a loan against a vehicle and the ownership of that vehicle is kept by the lender until the loan is paid back, much like a pawn broker. A guarantor loan enables a customer to take a loan out using a friend or family member to act as a guarantor.

Logbook and Guarantor loans

These loans have not fallen under regulation yet, and suffice it to say, the success that has been seen from the regulation of the payday industry should be a clear example for the regulators to administer to other credit service providers.

“The drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on people’s lives.”

Citizens Advice chief executive, Gillian Guy