Labour MP and tireless consumer rights campaigner, Stella Creasy, has said that the new short term loans provider regulations as instituted by the government are only of ‘limited value’ in preventing payday advance lenders from trapping consumers in unmanageable prisons of debt.
The vast majority of Brits feel that the payday lending industry needs to be more tightly regulated, with 93 per cent of one survey’s respondents indicating that the government needs to protect them better. Policymakers responded, implementing regulations that will impact all but 10 per cent of the nation’s payday lenders – and include limitations such as freezing interest and charges on a debt no later than two months after a borrower begins to stop being able to make payments.
Other changes include freezing charges for borrowers who demonstrate financial distress, provided that there is a repayment plan is agreed to between lender and borrower. It is precisely these late payment charges that can absolutely ruin a borrower, sending them in to a debt spiral that can lead – and has led – to financial ruination for far too many Brits.
These new regulations should help to prevent this sort of calamity, provided the lenders adhere to the new rules, which include requiring to check to ensure prospective borrowers are able to repay a given loan before the cash is transferred. However, Ms Creasy said she was concerned that lenders would neglect to implement the new regulations, as they are not statutory but simply voluntary, stating that in asking the industry to police itself, you’d might as well have Red Riding Hood ask the wolf to babysit her grandmother.