Those that have needed to use Payday Lenders at some point have finally received some good news. The caps on fees charged by Payday Loan companies put in place by the Financial Conduct Authority have now come into effect. You can read more about the changes, and the investigation in our previous blog.
Payday loan interest rates will be capped at 0.8% per day of the amount borrowed and no-one will have to pay back more than twice the amount they borrowed. The FCA stated after their review into Payday Loans last year that those unable to repay should be prevented from taking out such loans in the first instance.
Payday Lenders who feel they are unable to adapt to the new regulation have already began to cease trading. This is evidenced by the closure of Microcredit – a popular lender who has written off their clients debts at the FCA’s request. The move comes after a long investigation into the lending industry by the FCA who found that Payday Lenders were inadequately assessing their lenders ability to be able to pay back their loans.
Since the FCA began tightening regulation, the amount being lent within the industry has been halved. Christopher Woolard of the FCA felt the regulator had taken action as it was clear that payday loans had been pushing some people into unmanageable debt.
“For those people taking out payday loans, they should be able to borrow more cheaply from today, but also we make sure that people who should not be taking out those loans don’t actually get them,” he said.
Russell Hamblin-Boone, of the Consumer Finance Association, a trade body for payday lenders, said the landscape of payday lending had changed.
“There will be fewer people getting loans from fewer lenders and the loans they get will no longer be the single payment loans for less than 30 days,” he said.
“The loans that are available now will be for three months or more and they will be at slightly higher values as well. Very few loans will be rolled over.”
If you are struggling with debt issues, whether these are business or personal debts, The Debt Advisor Ltd which incorporates The Business Debt Advisor can help. There are a range of solutions available which include both formal and informal solutions such as Debt Management Plans (DMP), Individual Voluntary Arrangements (IVA), Bankruptcy as well as solutions for Businesses.
There is also free debt help and advice available through a variety of debt charities. For more information, we recommend you visit www.moneyadviceservice.org.uk.
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