There seems to be still considerable debate about whether the recent attempts by the government and the industry associations that represent the short term loans sector will be able to come to an agreement on what is acceptable practice by the industry as a whole.
New guidelines have been rolled out this month, which are meant to curtail some of the worst excesses of the payday industry, but one of the industry associations seems to think the majority of companies that roll out instant cash loans and short term loans are already self regulating themselves and the industry as a whole is quite responsible.
There seems to be no sign yet that government is considering a blanket cap on interest rates, despite widespread criticism of excessive APRs charged by some short term loans companies and the fact that many other countries have already imposed a cap. Other concerns have centred on credit checks, roll-overs and the number of loans that some people have been taking out with different short term loans companies without any attempts to stop them.
The CFA – the main short term loans association seems to think that there is little that needs doing and the majority of companies already carry out a check to see whether somebody has a job and the wherewithal to pay a loan back on time. However, not all payday companies belong to the association and the FLA – the alternative association that represents companies like Wonga have no such qualms about credit checks.
The three main proposals that were agreed by a cabinet meeting last month focused on the least controversial, yet still potentially damaging areas of roll over extensions, database centrality and APR advertising.
Basically, the report that came out of the meeting has proposed that no rollover extension be given at all, and that all loans are to be recorded on a central database, so hopefully this would stop people jumping from one loan company to another. The report also wants the interest rates to be much more clearly advertised, preferably showing clearly how much on total a borrower has to pay back
Predictably, the proposals are too much for some (the payday companies) and far too little for others.