Payday loan companies under scrutiny

Posted by Sharon Yewen in Personal Finance on 22 November 2012 - Sharon is Financial Controller at checkmyfile.

The Office of Fair Trading (OFT) has been inspecting the payday loan industry since February 2012 and, in an interim report, has warned that companies offering such loans must improve the way in which they lend money and collect debts, otherwise there will be penalties.

The OFT is already worried about its findings of reckless lending and aggressive debt collection. All 240 payday lenders have been put on notice to improve.

There are a number of concerns over the operation of the payday loan industry: lenders do not check properly to ascertain whether borrowers can afford to repay the money; too many loans are not repaid on time; loans are extended too often; lenders are too aggressive when borrowers fail to pay on time.

The OFT is also concerned about lenders using a continuous payment authority (CPA) which is when a credit card is used to ensure they are repaid automatically. They say that from now on borrowers must be fully informed about this method of payment and how to get out of it, and there must be an explicit agreement.

Lenders should not be able to continue taking money when the funds are not there.

Joanna Elson, Chief Executive of the Money Advice Trust says that “payday loans have a habit of making a bad situation worse”. She goes on to explain that “many thousands of people have come to us for help after having seen their debt problem made far more serious by taking out one or more payday loans.”

The Financial Ombudsman Service (FOS) says that between April and September 2012 they have received 271 new complaints. This is compared with 296 complaints in the whole of last year.

They are currently upholding 8 out of 10 cases in favour of the consumer.

Clearly there is a need for regulation and it should be all laid out in the OFT’s full report which is due in the New Year.

Sharon Yewen is Financial Controller at Checkmyfile. She is an FCA and has a degree in accountancy from the University of Exeter. You can contact Sharon at sharon.yewen@checkmyfile.com

What Credit Checks Look For When You Switch Energy

As we get deeper into Winter, it’s inevitable that millions of consumers across the UK will end up using more energy and spending more on bills due to the colder weather and long stretches of darkness.

Published on 9 Jan 2019 by Jamie Mackenzie Smith

Full Article

Pros and cons of going paperless

Whether you are environmentally motivated or simply to get a discount for moving your billing online, you might find it makes sense to abandon paper for your business, if you haven’t already.

Published on 7 Dec 2018 by Kevin Pearce

Full Article

How To Get The Best Car Finance Deals

New car sales may have slowed in recent years, with the economy, emissions scandals and Millennials all being cited as the root cause at one point or another. But the number of people choosing to use credit as a means of driving away in a new car continues to rise, according to figures from the Finance & Leasing Association which shows that the new car finance market grew by 15% in July 2018 when compared to the previous year.

Published on 8 Oct 2018 by Kiah Phillips

Full Article

We're Now More Likely To Be Borrowers Than Savers

UK Households are now more likely to be borrowers than savers, with savings at their lowest since 1963, according to a study by the Office for National Statistics. Households are increasingly borrowing more – by taking out loans, car finance, and mortgages – than they are collectively depositing into savings accounts.

Published on 5 Oct 2018 by Sam Griffin

Full Article

The Credit Crunch 10 Years On: What’s Changed?

For many people, especially the those lucky enough to not have been old enough to be directly affected, the economic downturn of 2007-2009 seems like a distant memory. The first iPhone had launched a mere two months before the recession hit, and since then they’ve rebooted the Spiderman film franchise not once, but twice. But more importantly, has enough time passed for the borrowing/lending market to revert to its old tricks?

Published on 26 Sep 2018 by Jamie Mackenzie Smith

Full Article

The Limitation Act 1980 and Debt Time limits

The majority of credit consumers believe that once a debt has been acquired, that debt will remain until the full balance has been cleared regardless of the length of time passed. This may not be the case though, thanks to a little-known piece of legislation known as the Limitation Act 1980.

Published on 19 Sep 2018 by Erika Bone

Full Article

UK Households More Likely to be Borrowers Than Savers

UK Households are now more likely to be borrowers than savers, with savings at their lowest since 1963, according to a study by the Office for National Statistics. Households are increasingly borrowing more – by taking out loans, mobile phones, car finance, and mortgages – than they are actively depositing into savings accounts.

Published on 3 Sep 2018 by Sam Griffin

Full Article

Wonga Administration: What it Means For You

On Thursday 30th August the payday lender Wonga filed for Administration, following a spike in compensation claims and increased pressure on the payday loans industry. This follows a steady decline in this form of lending since the FCA began introducing stricter regulations 2013 in the name of protecting consumers.

Published on 31 Aug 2018 by Jamie Mackenzie Smith

Full Article

How a Baby Name Can Affect Creditworthiness

A lot of preparation (and usually arguing) goes into choosing a baby name – books, ‘top 100’ lists, place names, family names – the list of possibilities is endless. The trouble is, most parents don’t give much thought to the long-term impact of the name they decide on, beyond checking to make sure it doesn’t sound ridiculous when paired with the last name or that when put into initials it doesn’t spell something unfortunate.

Published on 19 Aug 2018 by Jamie Mackenzie Smith

Full Article

The Advantages & Disadvantages of Store Cards

There are a number of reasons you might take out a store card: whether you’re just waiting in-line at the shop and find out you can save on today’s shopping or they offer the promise of making money in the future, these cards regularly find their way into wallets (or phones via an app). Most big retailers offer their own cards, which allow you to take your purchases home – often with a nice discount applied – without having to part with a penny at the till.

Published on 10 Jul 2018 by Tom Blandford

Full Article
keyboard_arrow_left

keyboard_arrow_right

We are rated number 1 for customer service on