New codes of practice to be unveiled for the instant cash loan industry

Two organisations that have a key role to play in regulating the activities of short term loans companies have been busy recently trying to tighten up the guidelines for the controversial industry.

The number of short term loans and instant cash loans companies has sky rocketed in Britain over the last two years and the effects of short term loans and short term loans with very high interest rates on borrowers has been high on the agenda for debate in all of Britain’s regional assemblies and the House of Lords recently.

There has been criticism of Britain’s lax legal attitude towards such companies and a feeling amongst some of the country’s social welfare organisations that companies have been particularly targeting the vulnerable in this country because their businesses have already been regulated and restricted overseas.

Now, the two organisations that have most to do with the regulation of short term loans in this country are beginning to act.

The FLA (Finance and Leasing Association) has already rolled out a new lending code for short term loans providers which will limit them to a maximum of three extensions of a loan. The criticism here has been that some short term loans companies have been deliberately encouraging borrowers to extend their original loans each month, driving them further into debt with interest rates topping the 1000% mark and more for many of the loans.

The Consumer Finance Association is working with the eight largest instant cash loan companies to bring in a new code of practice for the industry. This will nit only involve a restriction on the number of roll-overs possible but will ensure that there is much more transparency in the advertising of loans.

The criticism that has led to this particular focus is that much of the advertising of payday advances and instant cash loans has included terms that are more designed for bank overdrafts, with APRs and EARs being quoted. The idea of the CFA is to design the information available to lenders so that they know exactly what they are borrowing and what they have to pay back in cash terms after each period of lending, typically a month.

© 2023 All rights reserved. Reproduction in whole or in part without permission is prohibited. See our copyright rules.

What do you think?

Please note that email addresses are not visible on approved comments.