What is a payday loan? A payday loan is a great way of getting a sum of money in a short time without worrying about the paperwork that banks require when customers take out a new credit. Payday loans are a billion pound business in the US alone, because people prefer getting a payday loan …
Things are looking up for the payday loan industry says the Citizens Advice charity. The consumer research group reports that complaints from consumers about payday loan practices and companies are reduced by about 50%. That obviously means this is an ideal time for people to try payday loans and enjoy better service that is more geared toward what consumers want.
The Citizens Advice charity speculated that the reduction in customer complaints stemmed from new regulations that were put in place by the FCA (Financial Conduct Authority). These are rules that were established in April 2014. The overall restrictions for what payday loan companies can and cannot do were tightened. This tightening was followed up by a payday loan charge cap that went into effect in January of 2015.
Research into customer complaints stemming from the payday loan industry showed that there were more than 10,000 complaints about various lending companies in just the first three months of 2014. This was before the new regulations were put into effect, so the old rules would still have been in operation. Researchers compared that data to the number of complaints from the same industry in the same time period the following year, after all new regulations had taken effect. The number of complaints was about 5,500 and the overall drop had been 45%. A representative from the Citizens Advice group made it clear that this was great news for consumers. He said that it demonstrated just what a tremendous change could take place when fair practices are enforced and irresponsible lending was no longer tolerated.
The FCA began to regulate the payday loan industry in April of last year. When they started their regulation, they quickly put some new rules into place.
When the FCA took over regulation of the payday loan market in April 2014, it introduced new rules. The most important of these was one that limited how many times loans could be perpetuated or continued from one month to the next. This is known as rolling over, and it was causing many consumers to pay far more for their loans than they would have otherwise. Other changes included stricter rules about when money could be lent and how pervasive advertising for payday loans could be. New restrictions on advertising forced payday loan companies to be honest and open in the way they presented themselves to consumers.
The changes in January of this year have also had a tremendous effect on the industry, as repayment caps have been put into place. This has ensured that no consumer has had to pay in excess of 0.8% of what they were lent. It also ensured that no consumers would pay out more than double what they initially borrowed.
This has actually led to a shrinking of the payday loan industry, which is quite good for consumers. It means that those lenders who were lending irresponsibly are being weeded out and are no longer able to function with their previous methods of operation. It makes for a safer marketplace for consumers and provides a better environment for those lending companies that want to operate responsibly and in the best interests of their customers.