Self-regulation of payday lenders not working, MPs say

MPs placed payday advance lenders firmly in their sights this week, with an all-party Commons Select Committee stating the plans the credit industry has touted to tighten its codes of practice are simply not strong enough, and that self-regulation of the short term loans industry is not working.

MPs instead demanded that new legislation be passed to stop providers of short term loans with high interest rates from their exploitation of vulnerable classes in the UK.  Increased transparency was needed within the industry, they said, in order to give prospective customers a better view of the types of lending they could take out and what kinds of consequences they would face in the event that they miss repayment schedules.

It is high time that payday lenders were given no choice but to demonstrate that they check the ability of potential borrowers to repay the loans they are given, MPs also said.  Other calls to action included limitations being placed on how many times a given loan can be ‘rolled over’ in order to reduce the maximum amount of debt lenders can accrue, though there are some lenders that state they are already operating with such a system in place.

However, experts have said the problem with a cap on roll-overs is that borrowers can simply find another lender if they have reached the roll-over cap with their current one.  This means that payday advance firms such as Wonga, QuickQuid and the like, would need to set up a central borrower database to put an end to Brits who are too deep in debt to afford loan repayments.

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