The call for a payday cap remains unheard

The payday grumbles continue. Lately, it has been a parliamentary committee that has debated the rights and wrongs of short term loans companies.

A committee made up of members of the Department for Business, Innovation and Skills put out a lot of words about protecting the vulnerable, but its only real proposals centred on transparency and a stop to rollovers. A call for a cap on what have been described as exorbitantly high interest rates must have been a whisper as it certainly didn’t get heard.

Transparency has been an issue for sometime. The criticism centres around a noticeable reluctance on part of some short term loans lenders to advertise the exact interest rates that their customers will incur. These sometimes get buried in the hype of the advert and an emphasis on how easy the whole process is.

Rollovers are again another thorn in a lot of concerned citizens’ sides. So many people who are desperately short of readily available cash are unable to pay their loans back at the end of the term, typically a month, and roll over the loan for another month. In the process, the interest rate typically goes up and the borrower digs themselves ever deeper into debt.

One of the problems with the attempt to prevent rollovers is that the average badly in debt or chronic debtor simply switches from one quick cash provider to another. This avoids any problems in obtaining an extension with the same short term loans company, but compounds the overall problem as there are two, three or more different companies to deal with and debts to the lot of them. This could happen even when an instant cash loan company does what it says it does and prohibits rollovers itself.

Some commentators on the payday scene have suggested that the industry itself should be doing more to prevent the worst cases of indebtedness. One way it could show willing, say these people, would be to coordinate rollover information, so as to prevent a borrower jumping from one provider to another.

As to the cap on interest rates, it is no surprise that the most vehement of people opposed to this is the short term loans companies themselves! But why is the British government still so lax on interest rates that even US companies are starting up operations here because it is so unregulated.

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