Is it about time we capped the interest rate?

[youngmafbog]

Praying on the weak, poor and vulnerable some of these loan companies charge up to 4000%. I though loan sharking was illegal, but clearly not.

Why is it the EU can dictate barmy things such as straight cucumbers but cant do something simple and useful like cap the loan rate.

Yes, I know the companies are taking a greater risk with many of these people but such huge interest rates cannot be justified. If the person is that much of a risk you are not doing them any favours lending money and then heaping on piles of more debt.

http://news.sky.com/s...rrowers-miss-payments

[jackthehat]

It is not illegal to charge these rates........and a Free Market Economy is unlikely to curtail legal practise.

[rojash]

http://www.guardian.c...dviser-lobbyist-wonga

[squarebear]

The rates are clearly displayed for people to make informed decisions about whether to use these services.

[rojash]

"It is not illegal to charge these rates"
Maybe not, but it should be.

[youngmafbog]

Trigger, are you capable of making any useful contribution to debate or are you just out to wind me up.

How does capping ridiculous rate constitute shackling business?

I really dont get some of you lefties. You shout anyone right down saying we have no compassion, then if we show compassion and understanding you slate that too.

[youngmafbog]

Jack, i said I thought it was illegal but obviously not.

//nd a Free Market Economy is unlikely to curtail legal practise. //

why not, it has done with many other things?

[rojash]

errmmm... I'm a leftie, and I was agreeing with you.

[jake-the-peg]

The EU had a go at them Earlier this year when a number were found to be breaking the rules

http://www.independen...ak-rules-6289394.html

[hc4361]

These loans are meant to be very short term, making the APR irrelevant.

If I borrow £100 and pay back £115.91 ten days later, what does the APR work out at? Any one know?

Personally, I think a £16 charge is reasonable. That is Wonga's charge, by the way.

[LazyGun]

The OFT are currently investigating payday loan companies.

http://www.independen...origin=internalSearch

The Parliamentary Business, Innovation and Skills Select Committee is also running an investigation into payday loan companies, and taking evidence.

So, things are being done, investigations are being made, and it will be very interesting to see the outcome.

The EU are concerned about such practices too.
"As a result of the report the European Union has asked all the European finance authorities to investigate the companies by the Autumn. Any companies flaunting the rules will be named and shamed, then subsequently fined or shutdown."

So the EU is taking action - collecting evidence and urging national authorities to investigate if they are not already.

What more would you want them to do?

[factor-fiction]

This is a difficult area.

I can see that high APRs can be justified for low value, very short term loans. For example borrowing £100 for one month at a horrible sounding APR of 240% would mean repaying £120 at the end of the month. If you regard the extra £20 as an admin fee it's not too bad a way to finance an essential emergency loan.
I don't think we can expect a lender to charge much less than £20 given the risks involved. I recall a recent thread on here where geordie1 had failed to repay some of the loan and was advised on here to walk away because the lender probably wouldn't bother to chase him for the money. This advice brings home how risky the lending is for lenders and explains why high charges are needed for them to stay in business.

On the other hand where people rely on payday loans to repay previous loans there is a spiral of debt here from which there is no escape, and I can see that huge APRs here are wrong and make matters worse.

I just don't think there's an easy answer.

[Zeuhl]

The interest rate is a pointless comparison in most of these cases.

Some people are in such dire straits, having the opportunity to borrow £50 for a week until payday is a vital service and if they think it's worth paying £10 for that's their choice.

That would equate to an enormous AER if not paid back for a year which is not the purpose at all.

[Lisa_Louise]

You know the answer.. VOTE UKIP to get us out of the EU and we can have our own say in things.

[LazyGun]

Eh? How will a vote for UKip alter anything in this circumstance? The complaint in the original post was of a presumed lack of response by the EU - although that is factually wrong- not that the EU were interfering, or slowing the process down.

The OFT are investigating Wonga, to the extent of raiding offices. The UK parliament are investigating payday loans, taking evidence and preparing recommendations for legislation.

How would a vote for UKip aid in any way? Nevermind the fact that it also requires a wait of 2 years to vote, that UKip stand no chance of forming a government, and even were they able to, this would further delay any action on this issue.

[ummmm]

They aren't loan sharks. The won't go round your house and beat you up if you don't repay.

[Duncer]

Now that Wonga.com are sponsoring Newcastle, does Alan Pardew ask his players to go out and give 4,125% every week?

[LazyGun]

^^ LoL -