by Mark Johnston
Payday Lenders Throw in the Towel…..
It seems that for a substantial proportion of the UK population, simply meeting essential living costs is becoming increasingly unaffordable.
Peter Tutton of the debt charity Step Change said “increasing debt levels and falling numbers of people making monthly debt repayments shows the increasingly fragile nature of many household budgets.”
A payday loan is a loan taken out from a business that is not a bank. It is called a payday loan, because the customer generally only borrows just enough to get through to their next payday, upon which the money is due.
Generally they charge a large fee for the loan, which puts the interest rate very high, some rates are as high as four hundred percent.
Debt charity StepChange said the payday problems it is seeing are continuing to worsen. It helped 6,663 people with five or more payday loans in the first half of this year, which was almost the same number it saw for the whole of 2012.
Gillian Guy, the Citizens advice bureau chief executive, said: “Citizens Advice sees people day in day out who have been left in absolutely desperate situations by irresponsible lenders”.
Richard Lloyd, executive director of consumer group Which? added “People are increasingly turning to high cost credit just to pay for essentials or repay other debts, so it is vital that the Government and regulators continue get tougher on irresponsible lenders.”
Many officials reported in March this year that they had found evidence of problems ‘throughout the lifecycle’ of payday loans, from advertising to debt collection, and across the sector, including by leading lenders that are members of established trade associations.
In light of this the Office of Fair Trading (OFT) an industry watchdog has been carrying out a probe into “deep rooted” problems within the industry, such as lenders encouraging struggling borrowers to roll over loans they can not afford so that the debt balloons. This is following complaints from consumers, debt charities and the media,
The Financial Conduct Authority (FCA) has also warned payday lending firms that they could face a ban on TV and print advertising when it takes over regulator of the sector from April next year.
The industry watchdog therefore decided to issue 50 payday lenders, which account for 90 per cent of the current market, a deadline of a 12 week cut off point to show they are acting responsibly.
So recently the Office of Fair Trading (OFT) said 14 of the 50 lenders it wrote to were leaving the market and another firm is no longer operating.
Of the 14 lenders who are leaving the payday industry, three have surrendered their licences completely. The other 11 continue to operate in other areas where they still need a consumer credit licence to trade, such as pawnbroking or debt collection, for example.
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