Finally, we’re starting to see some action against payday loan companies. It’s been a hard fought task for MP Stella Creasy and the pose of experts stating the obvious – payday loans are bad news.
The Office of Fair Trading is the Government body for regulating financial companies and they have issued warnings to 50 payday loan companies. The warnings refer to payday lenders being asked to change their aggressive debt collection processes, being more responsible for who they lend payday loans to and how they collect money.
America Pioneered Change For Payday Loans
America is leading the way with payday loans but it’s not anything new; I wrote about how I hate payday loans and that America is progressive in how it deals with payday lenders. In truth, some States in Amercia are more progressive than others.
Each U.S. state has their own rules on short term lenders offering high interest loans. The length of the loan, number of rollovers and interest rates can be capped to protect the individuals.
The UK changes which the OFT has demanded will start to see Brits follow in the same footsteps and the United States. About time I say!!
Payday lenders have no morales, they will send debt collectors to the individuals place of work, they will take money from friends and family to pay a debt and they will lend money to people who are unemployed and can’t afford to repay the debt?!
Negotiating With Payday Lenders
It’s near impossible to negotiate with payday lenders. This is because the payday loan companies refuse to accept token payment, e.g. £1 per week with interest and charges frozen. The payday lender will place a default on the debtors credit file – which lasts 6 years – then continue to harass their client until they break.
Payday lenders are known to tell people to beg, borrow or steal to get the money they owe, even commit fraud. One payday lender in the UK I spoke to said my friend should take out another payday loan with another company to pay them back. That’s fraud! Take out a loan which is unaffordable, where lies would have to be told and the repayments will be impossible, just to pay off another payday lender… it makes no sense.
U.K. Government – Better Late Than Never
It took a seriously long independent report to find out that the practices of short term lenders were deplorable. I could have provided 100 cases studies in 15 minutes, it was so obvious. But, with the changes being enforced can it really change the financial landscape in the UK?
Some people rely on credit to exist – it’s not right, but it’s the truth. Payday lenders say if they didn’t exist then illegal loan sharks would exploit and bully people out of money. I say, two wrongs don’t make a right. Let’s get the payday lending world like America! We can follow the example of U.S. states and implement guidelines on how lending on a short term basis should work. People should have an element of protection while still being able to receive advice. For people who have debt problems, payday lenders should refer these individuals to advice charities for help.
We’re heading in the right direction!