Payday Loans: Are The FCA Doing Enough?

Payday Loans: Are The FCA Doing Enough? The Financial Conduct Authority (FCA) recently announced a number of clampdowns on the payday loan industry. But with the number of people struggling with payday loan debt on the rise, do the measures go far enough? FCA FINANCIM CONGUCT AUTHORITY The Statistics.... 42% 2013 2014 Increase in the number of people struggling with payday loans in first half of 2014 £72 Million The total value of payday loan debt handled by debt charity StepChange in the first half of 2014. £1,657 £62.4 Million The average payday loan debt dealt with by debt charity StepChange, compared to an average income of £1,320. Pre-tax profits made by the UK's largest payday loans lender Wonga.com in 2011 FCA Proposals 1. Initial cost cap of 0.8% per day For new loans, or loans rolled over, interest and fees must not exceed 0.8% of the amount borrowed. This lowers the costs for those borrowers paying a daily interest rate above the initial cost cap. 2. Fixed default fees capped at £15 FCA If borrowers cannot repay their loans on time, fees must not exceed £15. Interest on unpaid balances and default fees must not exceed 0.8% per day of the outstanding amount. FINANCIAL CONDUCT AUTHORITY * To be implemented in January 2015 - subject to consultation period. 3. Total cost cap of 100% Borrowers must never have to pay back more in fees and interest than the amount borrowed. But.. Is This Enough? It is a step in the right direction, but debt charity StepChange want to see further action, including: - BANK 1. Default fees capped at £12 This would bring fees in line with default charges on credit cards 2. A Real Time Database 3. Other Short Term Financing Giving lenders up to the minute information on potential borrowers' debt situation. Consumers will continue to need access to short-term credit and FCA action should also stimulate the reform of this market including overdrafts, logbook loans and home credit. With the payday loan industry worth an estimated £2billion in 2013, it is clear more needs to be done to protect consumers and help those struggling with debt. brought to you by Sources http://www.bbc.co.uk/news/business-29014633 http://www.stepchange.org/Paydayloans.aspx http://www.fca.org.uk/news/statement-on-a-cap-on-the-cost-of-payday-loans http://www.telegraph.co.uk/finance/10203843/Payday-loans-industry-by-numbers.html getmeby independent payday loans advice