Payday UK

Payday UK is one company that is considered as one of the most premium payday lenders in the world. They are one such company that have been instrumental in understanding the need of borrowers and arriving at methods to be able to tackle the problems that most of the borrowers are facing today. In addition to this, their debt collection practices have known to be at par with the new regulatory framework that is slowly coming into practice today, which has led to great borrower confidence. In an industry which is notorious for high interest rates, horrible debt collection practices, it has become an imperative for more responsible lenders to join the industry and work towards the overall upliftment of the general public.

Most store front payday lenders charge a fee that ranges between 10-20 pounds for every 100 pounds that you borrow. This is a standard market rate that has been set by these institutions and it can vary depending upon the state in which the payday lender functions. There are a few states which have higher or absolutely no limits which depends on the loan size. The borrower income is an important consideration in payday loans, as a lot depends upon the demographic of people who are coming out and applying for a loan. A majority of the payday lenders have claimed that they have people with an income range of 10000-40000 pounds on an average.

It is also important to understand that this income doesn’t reflect the entire household income. There could be other sources of income in the household and this holds true for a large number of people applying for a loan. It is important to consider the intensity of use, in the hands of the borrowers. What their pattern of buying a loan is, how often they are looking for a loan. In this consideration, it is also important to consider that even a roll-over of a loan is considered as another loan.

There have been various studies to suggest this level of activity amongst the borrowers and this can be seen with approximate figures depicting these patterns. Close to 50% of the borrowers have more than 10 transactions over a certain period of time, 29% had more than 20 transactions and a vast minority has about 1-2 transactions. This clearly shows the immensity of the situation. People have become increasingly dependent on these loans and it is being shown through studies such as these one.

The default charges and the high interest rates are what are causing the borrower’s to roll over the loan which in turn is forcing them into the cycle of debt. This also depends on how frequently the borrowers are paid. The people who aren’t paid as frequently tend to take out fewer loans as they don’t have a stable source of income. The people who are frequently paid tend to take out more loans than the rest. This is a common phenomenon which is impacting regulations all over.

There has been a concerted effort by payday lenders to dodge the reforms that have been put into place and this has led to major players leaving the industry as a result of that. There has been a considerable amount of subterfuge in this regard where the payday lenders position themselves as brokers. This enables them to charge the maximum interest rate along with the broker fee which compensates for the amount of money they are losing out on, if they don’t deal in payday loans.  This particular practice increased drastically after 2005. In that same year, there was a crackdown by regulatory bodies like the Financial Conduct Authority who were tying up with national banks to avoid consumer protection laws and function on their own free will.

Despite many payday lenders claiming the high interest rates for their functioning, there is no law that clearly states that the payday lenders are allowed to lend at triple-digit interest rates which could be one of the main problems, since nothing has been clearly defined up till now. If anything, there have been laws which have been responsible for de-regulating the industry like the Monetary Control Act of 1979.

Although there are several payday lenders in the industry today which are functioning under different names and many of them carry a great amount of goodwill in the market, the license and the label which they carry is not as important as the high interest rates and the balloon payments which are due on the borrowers next payday.

It has also been observed that there are many direct lenders which are selling under a third party where there is no law governing their functioning and at the same time, the debt collection practices are also being leased out to a third party where it cannot be linked back to the direct lender and as a result of this, they have become accustomed to resorting to harassment and other techniques which have hampered the condition of the customer and this has led to many malpractices being adopted by these third parties. What is important to consider in this scenario, is how difficult it has become for regulatory bodies to track these organizations and link the third parties activities back to the direct lender, as there is no connecting link between them as such. This creates an uncertain environment, where the regulators find it extremely difficult to reach out to the right culprits in this entire mess.

What is important to consider in this entire scenario is the fact that there have been many organizations that have worked towards capping the interest rates and impose regulations which have been made mandatory but the states need to work in tandem with the regulatory body in order to ensure that there is no scope for any kind of malpractice that can be tolerated. This urgency needs to be realized by the states as well and all of them need to come to a common page in what could become a repeat of 2008.