Another Case Of The Bleeding Obvious !

[mikey4444]

http://www.bbc.co.uk/news/business-27790924

As these Pay Day loan companies, or loan sharks as they used to be known, charge eye-watering amounts of interest, is it any wonder that they are not competitive ?

[jno]

not at all - market economics should dictate that one company could attract more business by undercutting the rates others charge (while still waxing fat). But none of them are charities and shouldn't be forced to charge cheap rates any more than Tesco should.

The problem seems to be transparency: there may be some charging better rates but it's hard to work out which ones (a bit like it used to be hard to find out exactly what Ryanair fares were going to be). That can be fixed.

[youngmafbog]

Some of the Pay day loans are expensive, others are not really that more expensive than a Bank loan if you take into account fees as well as interest. As jno says, transparency should fix this problem.

I'm not sure they are sharks, sharks still exist and still break your bones if you dont pay. The likes of Wonga do not stoop quite that low.

What worried me from a news article on sky this morning is that some people take up to 18 loans a year. That is the real problem; money management. As usual we should really expend the effort on the cause not the symptom.

[hc4361]

Some of them are cheaper than an unauthorised bank overdraft, especially if the facility is used as it be, as a very short term loan.

And they don't duff you up if you are late with a payment.

[treetops68]

As with anything in life, if recent program reportage is anything to go by, it's more of a case of a few making things bad for the many. It needs regulation and the cowboys closing down.

[mikey4444]

I agree treetops but in an industry like pay day loans, how do you sort the wheat out from the chaff ? These companies make their huge profits from people that don't pay up on time, not from the ones who do. And they use the same loan shark practise of offering you a further loan, to pay off the ones you can't afford, that you already have. They also go after the same section of society that loan sharks do...the poor and less-than-well educated.

There is no good news whatsoever here :::

http://www.bbc.co.uk/news/business-26817986

http://www.bbc.co.uk/news/business-26826181

[ToraToraTora]

The problem is the APR isn't really very good at determining cost at this end of the market. They are lending small amounts for short periods clearly the APRs are going to be astronomical but the actual amount repaid is what is important. So if I lend you £100 on Friday and ask for £110 next Friday then that sounds reasonable but it's still 500%+ and I've only made a tenner. The problem is that those that use these sorts of loans tend to use one to repay another and borrow a bit more and end up with the debt spiraling out of control and then the huge interest rates make it impossible to repay. The lenders themselves don't have to be competetive because their clientelle are usually just gratefull to find an lender willing to lend. There is also a bit of an unspoken cartel arrangement with these companies.

[treetops68]

It wouldn't be easy, I agree, especially given the circumstances you have outlined but using a TV campaign to inform the uneducated and unwary would be a start. Anyone caught in such a trap should be encouraged to seek help from Trading Standards\CAB so that, providing legislation was in place, appropriate action could be taken. Or am I being to simplistic?

[Peter Pedant]

for chrissakes jno
it is called usury - and I think there were rules against it even in the Roman Empire.... let alone the Bible,
and Quran.....

so yes, regulation of rates of interest IS a subject for legislation

If the supply demand curve ISN'T operating (are we sure it isnt )
then it isnt bleeding obvious why not....

I initially thought it was the market wasnt saturated....
perhaps it is because the market IS saturated....

choice is limited in some way.....intersting question

[hc4361]

The problem isn't just the fault of the lenders, it's the borrowers. Some people have no idea how to manage their finances, or have gambling or drug problems and they will do anything to borrow money. And there will always be people willing to provide that money, at a cost.

I really don't know what the answer is. Maybe schools should educate children about money management and household budgeting

[ToraToraTora]

trouble is PP that if they capped interest rates to some arbitrary figure then it won't be worth lending they wont be able to cover costs let alone make a profit. Using my £100 analogy, I would not be interested in lending it if I only got back 95p!

[woofgang]

Payday loan companies really don't want people to default because it costs them money which they probably won't recover. Like every other commercial enterprise, they want to make their profit as easily as possible and keep as good a rep as they can. Rep is not enhanced by needing to get CCJ's against customers and use bailiffs! If they don't pursue debt though, people will get the idea that they can take out a loan and not repay it which is also terrible for business. I agree that the rates need to be made clearer, also that it would be in everyone's interests to tighten up on the people they will loan to (grammar!!)