The Changing Payday Loan Industry

Since the credit crisis in 2008 payday lenders have been benefiting from the misery of others. There are horror stories about people finding

themselves owing three times what they borrowed and being able to borrow from 5 different companies and then not being able to afford to pay the loans back. It got so bad that in January of this year the FCA imposed tough new regulations to stop these lenders lending irresponsibly to people. Many lenders have been forced to exit the marketplace as their earning potential has severely decreased. Other lenders however have emerged as they take on board the new regulations and lead the way in cleaning up the face of the industry. One such payday loans lender, Wizzcash who only entered the marketplace in 2012 pride themselves on responsible lending and low interest rates. Their website clearly sets out their terms and conditions and warnings about borrowing responsibly are very clear for all to see.

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How will payday lenders be affected in the long term?

For those lenders who were charging as much as 6000% APR they are now forced to charge no more than 0.8% per day. This is a serious cut in earnings and because of this the more irresponsible lenders who were just trying to make as much money as possible regardless of the consequences are handing back their credit licenses and walking away. Shops are closing – already the numbers have dwindled from 1,400 to 500 with more set to close and more business is now being done online.

Expert forecasts 3 or 4 lenders will remain!

Such is the impact of these FCA regulations that lenders are now predicting that as few as 3 or 4 lenders will remain in the industry as the big clean up occurs. Considering there are currently 400 firms operating in the UK that is a huge number of lenders that will close. Many lenders won’t survive these sanctions choosing to make money elsewhere but for those that do what will happen with demand? The industry is still worth more than many would like it to be but as the clean-up continues firms will be forced to advertise these loans as a last resort for the borrower to deal with unexpected bills like roof repairs, broken boiler or emergency car repairs.

No longer will it be acceptable to tempt people into taking out one of these loans for a holiday or a spending spree. The focus is very much on lending and borrowing responsibly and not falling any further into a black hole of debt despair. Television advertising guidance has been released to ensure that this type of borrowing is not made attractive to people and seen as a good option to get short term cash. Will 3 or 4 payday lenders be all that is left? It seems like a bold prediction but only time will tell.

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uditpatel • 2019 Aug 16

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