Pay day loan companies in the UK have had it pretty easy when you consider what payday lenders over in America have had to put up with from various states of late.
Mp’s in the commons this week came to the conclusion that self regulation is not working in the United Kingdom.
The members of Parliament who attended the meeting demanded new laws be introduced for greater transparency: They want the consumer to have clear and concise information detailing the financial product they are taking out and a better emphasis on the penalties for non payment.
They also said that the time has come for payday loan lenders to show, categorically, that they do run proper checks on the applicants applying for short term credit to see that they CAN actually afford to take out the high interest loan.
Just like government officials in America, UK members of Parliament are advocating that there should be a limit on how many times small payday loans can be rolled over. Debt spirals get out of control rapidly causing many people to slip into debt. Capping the number of payday loan roll overs should see people limited to the levels of debt they can rack up.
As has been pointed out, it would be possible for a consumer to apply for a small cash loan from another lender, but an idea has been thought up to counter this, the introduction of a central database that all credit licensed payday lenders will have access to, to see that they are complying with the potential law of capping loan takeouts.
Other ideas proposed consisted of a cap on the payment authority of loan companies on consumers bank accounts, limiting the cash they can access from the consumers account. That idea would give a consumer far better protection against rogue companies who are out to make cash by all means, even if it means destroying people financially. Other proposals spoke of giving the financial regulators more power to totally ban harmful products and to speed up the process for revoking companies licences when found in breach of the law. As has been witnessed with the recent revoke of Yes Loans consumer credit license, they are still allowed, by law, to trade while an appeal goes through. This is a loop in the system that requires shutting, and fast.
Interesting times ahead for the payday loans industry in the UK and America.