Payday loan chief exec supports borrowing cap in theory

The chief executive of one provider of instant short term loans has recently come out in support of a theoretical borrowing cap placed on short term loans called for Labour MP Stella Creasy.

Gary Miller-Cheevers, payday advance firm speedeloans.com’s chief executive, said that instant cash loans provide for the short term needs of Brits when it comes to getting extra cash in a hurry.  When used in a responsible manner, these loans can be cost-effective, Mr Miller-Cheevers said, adding that research shows more than three out of every ten Brits lack any sort of accessible savings, which means that instant short term loans could be the only place these individuals can turn for short-term help to get to their next pay date.

However, irresponsible lenders do exist, remarked the chief executive, who charge incredibly high amounts to their customers just to borrow a relatively small sum of cash.  This lead Mr Miller-Cheevers to agree to a theoretical borrowing cap, endorsing the idea – but he said that policymakers need to be careful in the particulars of a cap, as the cost of credit is not the same as an APR.

Using the APR to measure a loan that lasts for very short periods of time is ‘wholly inappropriate,’ the chief executive commented.  Mr Miller-Cheevers’ company charges an average of 1 per cent interest daily on its loans, which are usually for a term of around 19 days, he also said.

Instead, the company expresses the cost of its loans in in pound terms in order to allow customers to more easily compare how much it will actually cost to take out a loan and to determine quickly whether they can easily afford it or not.  Mr Miller-Cheevers drew an analogy to borrowing £100 from a close friend for a few days and then paying him back while spending £5 on him at the pub as a ‘thank you,’ which would be around 1.25 per cent in interest a day – or more than 6,000 per cent if measured as an APR.

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