Payday loans industry needs shake-up

Handing over cash

Vulnerable people are increasingly relying on commercial debt management companies and payday loans and the government needs to take action to ensure this industry is better regulated, says the report by the Business, Innovation and Skills (BIS) Committee.

Payday loans are highlighted as one of the main areas of concern. The report says consumers need to be given more information on the costs involved and the benefits of shopping around.

The MPs also want companies providing these loans to improve their credit checking to make sure consumers aren't being pushed into unaffordable levels of credit and action taken to stop the rollover of payday loans, which can lead to spiraling debts.


The report also calls for debt management companies, which are estimated to make £250 million a year, to phase out the upfront fees they charge and publish both the total cost of their fees and the outcomes of each case.

The MPs would also like to see the Financial Services Authority, the regulator, given the power to ban products it sees as harmful and businesses providing high-risk loans charged a higher license fee.

The Office of Fair Trading (OFT) is already investigating payday loan companies and a review is expected at the end of the year.

"Payday loans, by their very nature, appeal to those in serious financial need, some of whom will have low levels of financial literacy," says Adrian Bailey MP, chairman of the BIS committee.

"We must be certain that this industry adheres to the highest standards - either through the codes of practice that are currently being developed or, failing that, by the new regulator. Consumers must have a clear idea of the cost of this form of credit and of the realities and penalties of late payment," he adds.

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Payday lenders need better regulation, in my view. 
One of them, QuickQuid, wanted to charge me 5,200% APR interest - even though I had never taken out a loan with them. When I phoned to complain, I discovered that all calls to their London office are re-routed to the USA. When I said I was also recording the call, the conversation had to be terminated.
I've now uploaded to my YouTube channel: 'My Exasperating Phone Call With QuickQuid'

Hi everyone. I know its a bit doubtful when it comes to applying for a payday loan. Most expecially if the issue is about hidden charges. You do not have to be concerned about hidden fees with your payday advance. In fact, the lender will make sure you know all additional charges upfront or else they cannot charge them legally. That is why payday cash advances are really very transparent goods. You can get a pay day loan and know you are not being lied to about the numbers.
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