A commons select committee made up of delegates from across the house sat this week to discuss the possibility of cracking down on certain codes of practise in place for the instant cash loan industry. However, after much deliberation, they decided that the time has come for direct action and that, no matter how stringent the codes of practise become and how close the majority of payday lenders stick to them, that there is enough risk remaining to warrant dropping self-regulation and imposing new laws which provide greater exposure for the customer and more responsibility for the lender.
One of their key points was that it should be transparent to the customer exactly what type of loan, whether it be a short term loan with high interest or other type of lending scenario, they are taking out. Also, the all-party delegation would like the penalties for not meeting repaying dates spelt out in huge letters for the customer so they know exactly what they’re faced with should they default one a repayment.
One upshot of the meeting that may worry instant cash loan firms is a possible call to action for them to write off any outstanding loans whereby they have not checked a customer’s ability to pay beforehand. Certainly, it is likely that background checks will now be required into all applications of this nature.
However, this may defeat the object, putting restrictions certainly on the time it takes to get money into a borrowers bank but also to the clientèle. If this policy were adopted, it may mean the end of the no credit check loan all together. The question is: then where would people go to make ends meet?
By adopting this tactic it is hoped that it will stop the current trend of customers hopping from one instant cash loan company to the next, as in a recent report it has been suggested that one third of all UK short term loans are taken out to pay off existing ones in a roll-over effect that they wish to limit, meaning that a customer will eventually hit a brick wall and face the fact that he has to pay up.
As things stand, once you ‘submit’ your confirmation to borrow from a payday lender you are authorising them to access your funds by way of a continuous payment authority order. The committee want this aspect changed, giving more control back to the customer.
And lastly, the committee want greater powers for the OFT. If a loan is deemed to be harmful to its potential client base they want it banned and if a firm is found to be breaking the law, they want to see the industry’s regulatory body given greater powers to close down instant cash loan firms.
All of these issues, although prevalent in some detail across the industry sector, have been brought to the surface thanks to the current OFT enquiry and what it has found at Yes Loans. These rulings seem like a bit of a knee-jerk to one provider in an ocean of providers and is not representative of the whole. Let’s hope the millionaires in the cabinet never fall on hard times when they’re voted out of a job next time around and ever have to call upon this type of instant cash loan – they may have all been put out of business through impossible operating criteria, by then.