Struggling financially is an issue that many of us are dealing with daily which can lead to additional stresses for many of us. But with the payday loan industry providing you with the alternative finance that you need, you can get yourself out of financial difficulty should you need to. In this article, we will be providing you with insight into how this industry has changed over the years due to FCA regulations.
The Rules Implemented By The Financial Conduct Authority
Before the intervention from the Financial Conduct Authority, there was a vast amount of unfair lending occurring in the payday loan sector due to the sheer number of lenders out there on the market at this time. When the Financial Conduct Authority conducted their report, they found that a majority of those offering loan types were failing to put a warning to customers as well as providing miss leading information. As a result, the financial conduct authority implemented several regulations that need to be met by regulation to ensure that the market is fair. These rules as well as other changes to advertisement laws surrounding payday loans led to a vast amount of disruption to the lenders with a significant number of them not trading anymore as a result.
The regulations put in place by the FCA were there to ensure that the market was as fair as possible for lenders. These new rules were the following:
No More Than 0.8% interest can be charged on loans per day on any payday loans taken out moving forwards. This means that for every £100 borrowed there can only be 80p worth of interest
Default Charges Were Capped At £15 – this, of course, led to some of the lenders removing them altogether. This has meant better opportunities for paying back loans for customers during this time.
Borrowers Are Not Allowed To Pay More In interest And Fees Than The Original Size Of their Loan – This was put in place to prevent astronomical default payments to ensure that the process is much more affordable for those paying back loans.
Loans Cannot Roll Over More Than Three Times
Continuous Payment Authorities cannot fail more than two times – This is how the payment is collected.
Changes That Work For The Customer
Due to the nature of the market at this time, the involvement of the FCA made for a much more competitive nature to the market at this time. Though this has since gone on to create a much fairer market for the business allowing for several loan types to aid people through their financial difficulty and allow them to pay back the loan on time every month. In addition, there have been several checks implemented to ensure that lenders are only giving money to those that can afford to pay it back.
With this in mind, there are several ways that the payday loan industry has changed over the years, allowing for much fairer lending in the future for those that need it.