Payday Loans have been in business without facing any form of regulation for far too long. This has seen their unprecedented rise which has brought about the rise of an even more unstable economy. https://www.paydayuk.co.uk

2. Payday Loans have been in business without
facing any form of regulation for far too long.
This has seen their unprecedented rise which
has brought about the rise of an even more
unstable economy. There have been
speculations circling around the complete
elimination of this industry, which could see just
4-5 payday lenders left from a pool of almost
400 payday lenders currently operating in the
industry. Companies like Payday UK, Lending
Stream, and Speedy Cash are some of the
lenders who don’t see a profit in being in this
industry and as a result, will gradually transition
out of this business.

3. Some of the reasons why lenders are
considering moving out are because of
the strict cap that has been placed on
them in terms of interest rates and fees.
With a drastic difference from the
exorbitantly high interest rates that came
with these types of loans, the Financial
Conduct Authority has put a maximum
cap of 0.8 per cent per day on these loans
offered.

4. In addition to that, the default charges
and penalty fees that did not have a limit
earlier and most notoriously dependent
on the variable market rates have now
been placed under a strict cap of 15
pounds per 100 pounds on any amount
that the borrower opts for.

6. This has been welcomed by authorities
as well as borrowers, as this was leading
many people into the cycle of debt,
which was seeing hundreds of thousands
of a vulnerable population perishing to
the uncertainty of these institutions.

7. Moreover, this has been a greater
emphasis that is being placed by
authorities to shift borrowers to more
stable and less risky lines of credit, so as
to avoid any kind of malpractices. This is
seeing the rise of credit unions, non-
profit organizations and many such
institutions that can now replace the
payday lending industry.

8. Interestingly enough, many of the
conventional banks have recently stated
that the demographic that is dependent
on these payday lenders also come under
their target demographic, which shows
how unaware the borrowers are, in the
area of fiscal knowledge.

10. On the other hand, many experts have
also claimed the “invisible” presence of
these major banks in the payday lending
industry as numerous surveys have found
these payday lenders like Payday
UK being financed upto almost 38% of
their operations by these banks. Once the
authorities stepped in, these major banks
bowed out of the industry but not before
creating a huge ripple in people’s
disposable income.

11. In addition to that, these banks, realizing
the potential profitability of this industry,
formed other means of interacting with
borrowers through the appointing of
middlemen who claimed to have no direct
link to the major players, but were playing
an active role in this industry. Ever since
the caps introduced by the FCA, it has
seen most of the players leaving the
industry barring a few major players who
have agreed to stay on, respecting the
ethical standards set by the regulatory
body.

12. It has been observed through several
studies that many of these payday lenders
are extensions of major banks and
financial institutions. This essentially
means that these payday lenders are a
front for these major banks that are
responsible for only handling the
collection and the application process and
the loan is actually given by these banks.
The state usury laws are also one issue
that has been bothering critiques of this
industry.

14. For example, in most of the states in the
US (where this industry was thriving),
where they found that the laws restricted
the interest rates they could charge on
one loan, they started exporting their
interest rates to states where the laws
were not so strict, provided they were
present in those states. If they were
controlled by banks, the banks would
simply do the exporting so that it was
easier to manipulate the market.

15. For payday lenders who did not have a store
outside one state, they would affiliate with
payday lenders in other states or sell their
business to those lenders, in order to ensure
continued profit. However, states soon realized
that the cap on the interest rates were in their
hands and once they saw the state of distress
this was leading borrowers to, they decided to
confine the interest rate to a strict 15% on every
100 borrowed. This has seen the start of many
regulations that are needed to run this industry.

16. One of the main concerns for payday
lenders like Payday UK and others is the
fact that there might be a serious
encroachment on their customer base, if
banks were to deal directly with the
customers. This would ideally mean that
banks would not needpayday
loans lenders to offer cash advances to
the customers and since banks have a
much larger customer base than payday
lenders, this could serve as a benefit to
the borrowers.

18. There have been banks like the Wells Fargo
Bank that has stepped up the initiative on
these practices. They are offering a scheme
called as the “Direct Deposit Advance” which
they are supplying only to customers who have
a direct account with the bank. This includes
giving loans of the amounts ranging between
300 pounds to 500 pounds with a relatively
lower interest charge of 5 pounds on every
100 pounds and would be automatically
deducted from the next time you deposit
money into your account.

19. Since these banks deal only with their
customers, there is less chance of
malpractice, there is a sense of security
amongst the borrowers and it also brings
confidence in the minds of the borrowers
knowing they will not have to pay
additional interest charges.

20. By allowing this practice, this also filters
the demographic applying for these
loans. Since the borrowers would be
people with a valid bank account, there
would be no need for credit checks and
these loans could be offered to people
for the purpose for which they should be
used and that is during emergencies.
This is a practice that should be
encouraged by the critics and supporters
alike.

21. For more information go here:
www.paydayuk.co.uk

22. Thank You