UK: Payday loan firms have 12 weeks to change

[klr]

I was wondering why I hadn't seen any TV adverts lately for wonga.

Payday lenders told to improve by OFT

Payday loan firms have been told to change their behaviour after the Office of Fair Trading (OFT) found evidence of "widespread irresponsible lending".

The OFT is giving the biggest 50 firms 12 weeks to change their practices, or risk losing their licences.

It also plans to refer the market to the Competition Commission, after it found "deep-rooted" problems in how payday loan companies compete.

In response, the loans industry said it was already changing its operations.

The government has also announced plans to "weed out rogue lenders" and place further controls on the way they are allowed to advertise.
'Fundamental problems'

The OFT did not name the companies that it studied, but said they covered 90% of the payday loans market in the UK.

Among the poor practices identified were:

a failure to work out whether people could afford the loans
"aggressive" debt collection practices
a failure to explain how repayments are collected
a lack of sufficient forbearance for those who cannot afford the repayments

In addition, it said the high rates of interest charged by payday lenders could make the consequences of irresponsible lending "particularly acute".

"We have found fundamental problems with the way the payday market works and widespread breaches of the law and regulations, causing misery and hardship for many borrowers," said Clive Maxwell, the OFT's chief executive.

The OFT said too many people were granted loans they could not afford to repay.

It also said that payday lenders relied on many people not being able to pay off their original loans on time, forcing them to take out new loans.

Although they are often described as one-off short term loans, costing an average of £25 per £100 for 30 days, it said up to half of payday lenders' revenue came from loans that last for a longer period.

...

more here: http://www.bbc.co.uk/news/business-21683739

[Gawdzilla Sama]

Marxists!

[klr]

Marxists!

Yup, that's the response I was expecting alright.

[Svartalf]

Let's take a pound of flesh out of Shylock

[redunderthebed]

I dunno what its like in the UK but here in my experience turning up to one of these places was proof enough that you could afford to get your stuff out of "hock" fuck the fact that you were probably so fucking strung out on drugs/alcohol that you didn't care whether you could.

I think regulating this system to an extent is pointless because it caters to people who desperate and wont complain.

[klr]

I dunno what its like in the UK but here in my experience turning up to one of these places was proof enough that you could afford to get your stuff out of "hock" fuck the fact that you were probably so fucking strung out on drugs/alcohol that you didn't care whether you could.

I think regulating this system to an extent is pointless because it caters to people who desperate and wont complain.

That makes sense, but it also seems that people have been complaining, and in spades.

[redunderthebed]

I dunno what its like in the UK but here in my experience turning up to one of these places was proof enough that you could afford to get your stuff out of "hock" fuck the fact that you were probably so fucking strung out on drugs/alcohol that you didn't care whether you could.

I think regulating this system to an extent is pointless because it caters to people who desperate and wont complain.

That makes sense, but it also seems that people have been complaining, and in spades.

In my experience that isn't the work of individuals but of social workers and social charities.

I personally thing the whole fucking racket should be outlawed but that will just drive the whole thing underground. Just like ID requirements here have stopped people (mainly) from hocking stolen goods that has merely meant especially for junkies just taking the goods straight to the dealer and swapping it for the stuff they were after anyway or flogging it off on ebay/newspaper/other informal means.

[JimC]

They are predatory arseholes, but the people they lend to are also feckless idiots...

However, they are feckless idiots who need protection from predators...

[Rum]

Some of the business models they have been employing here make it much more worth their while for people to default on payments, roll over the loan, incur huge interest payments and dig themselves further and further into debt. Some of the firms that have been targeted deliberately encourage defaulting on payments. Nasty people profiting from the pain of others.

[Guy_Montag]

Next on the list: Brighthouse - sell a £200 telly for £500 & charge 40% interest on top.

I'm sure i heard, but am too lazy too google it, that in France if a lender lends more than is reasonable & the borrower defaults, then the lender picks up the tab. Seems a sensible solution for this country. It obviously doesn't prevent someone who loses a reasonable job getting into trouble, but it stops people borrowing beyond their means.

[Gawdzilla Sama]

Rent-to-own places in the US do the same thing, you pay 3 times what the item is worth because you can't save up the money to buy it outright.

[mistermack]

The way to stop these abuses is to hit the firms in their pockets.

Impose restrictions on how they can collect defaults. If the interest rates are over a certain level, you can't distrain goods or property or get an order put on a salary. Nor can you impose administration fees. You just have to wait, and hope they pay.

The exploitation would stop overnight.

People say that people wouldn't be able to get a loan. Good. The vast majority shouldn't be borrowing anyway.

[Gawdzilla Sama]

We passed a "full disclosure" law here several years ago. The companies immediately got busy figuring out ways to get around it.

[Rum]

The way to stop these abuses is to hit the firms in their pockets.

Impose restrictions on how they can collect defaults. If the interest rates are over a certain level, you can't distrain goods or property or get an order put on a salary. Nor can you impose administration fees. You just have to wait, and hope they pay.

The exploitation would stop overnight.

People say that people wouldn't be able to get a loan. Good. The vast majority shouldn't be borrowing anyway.

Well yes. That's what the news item is about - legislation.

[MrJonno]

Any financial institution whose business model relies on people not being able to make their repayments is not something we need in our society. If a bank loans you money they profit on the interest and not paying the loan back costs them as much as it costs the people they lend to which is the way it should be