While much of the retail sector has experienced a significant downturn and a lot of the manufacturing has been contracted out or outsourced to bases overseas there remain one shining beacon of entrepreneurial activity, while at the same time invites criticism and controversy as it steadily expands across the land. This is the short term, instant cash or instant cash loan industry.
The controversy still reverberates around the morality of the significantly high interest rates of the short term loans providers. Many newspapers like the Guardian and the Daily Mail claim to have taken up the struggle against some of the more extreme facets of the payday companies, though it is hard to say whether this is an honest reflection of what the newspapers think or it is simply good for newspaper circulation. Some of the companies can charge interest rates in the thousands of percent on annual basis. However, the payday companies say that a bald statement of APRs is not a very good way to judge how the sector works as the loans are only designed to be lent on a short time basis only.
Some short term loans company spokespeople say that one way to compare the wilder claims about high APRs is like complaining that a hotel might cost somebody £10,000 a year. Of course, very few people would be charged anything like this as they only stay in a hotel for a short time and budget for it. Similarly, short term loans are designed to be lent to people in need for a short time only and for this brief period the chance to get an instant cash loan without any hassles.
The Consumer Finance Association has argued that there should be no move to cap interest rates, even though this is exactly what has happened in many other western countries. However, they are aware that there are some companies that are ruining the reputation of the industry as a whole and are supporting the recent investigation by the Office of Fair Trading into the activities of the major short term loans companies.
The bankruptcy advice firm, R3, reports meanwhile that the high interest rates of the short term loans industry can, in some circumstances, drive people into high levels of debt if they do not have the means to repay after the initial period. 60% of people who had taken out a short term loan, according to R3, regretted doing so afterwards, and 68% felt that their financial situation had got worse as a result of the loan.