Payday loans

[anotheoldgit]

http://www.dailymail....short-term-loans.html

These extortionate interest rates are criminal, could not the Government put a cap on how much these sharks are allowed to charge?

At the same time perhaps they could also consider putting a cap on how much rent private landlords are allowed to charge?

[rojash]

Well, they could, as have The US and the rest of Europe.
But you have to keep in mind that 50% of the Tory party funding comes from financial institutions.

[Kayless]

Yes but they should also put some sort of cap on the level of stupidity required to actually borrow at these rates.

[AB Editor]

It's not very "free market" to do that. I don't think the Tories would be interested?

[Kayless]

You also have to put it in context, for example if I lent you £100 and you gave me £110 back next week. The APR would come out at a squillion % but in reality it's a tenner.

[Rusholme]

http://www.bbc.co.uk/news/business-16002022

[factor-fiction]

I would like to see a limit but I think it would still have to be very high to make these 'emergency loans' work.
For example if Payday loans etc had to cap their emergency loan rate at an APR of say 100% (which still sounds very high I know) it would mean that if they lent you £100 for 2 weeks until payday they would have to ask for something like £104 back rather than their current figure of maybe £120-130.
Given the admin cost and the risk they are taking with their loans (as there is no security and they have little knowledge of the customer) they simply wouldn't be able to make it worthwhile.
Now I'm sure many would say 'good riddance' if they went out of business, but some customers genuinely want the service and others would resort to illegal loan sharks.

[Zeuhl]

This is a typical 'sub-prime' financial product.

It provides a service to people who can't borrow anywhere else because of their history or circumstances.

The rates are higher because they are a bad risk.

At least they are regulated which the traditional alternative - back street loan sharks - aren't.

[Gromit]

People in these circumstances should use a Credit Union to raise money.

[factor-fiction]

Yes- but don't you need to put money in as well to be a member? Often people start off with Payday Loans etc because of an emergency ( eg forgotten TV licence is due tomorrow but don't have the cash until payday in 2 weeks

[anotheoldgit]

factor30

I would think paying their TV licence on time would be their least priority.

[EDDIE51]

It can work out cheaper than getting a £35 bank charge for going overdrawn by a few £s for a few days.

[factor-fiction]

Fair enough, AOG- let's say car tax then or you need to pay for an unexpected boiler repair.
I don't believe in over-regulating when there may be an unintended consequence of driving more people to loan sharks but I must admit I'm not sure on this issue as to whether Payday loans etc are just meeting a need that is there (and is thereby keeping people away from loan sharks) or whether they are creating a demand that wouldn't otherwise be there (by convincing people they can buy something they couldn't otherwise afford).

I think there is a bit of both here and I am concerned about those who start off with a short loan just to tide them over, then find they can't pay it back on time so take out another loan, and so on.

As for putting a cap on rents, I can't see how it would work. Would it be so much per square metre? Would it vary by quality of the room? Or the location?

And where would government involvement stop? The cost of a car, the price of bananas, the cost of a haircut? I hate to think how many public servants we'd need to employ to draw up the rules and go round checking prices, room sizes etc

[ABerrant]

You call these loan companies "sharks" but they are regulated by the OFT which issues their credit licences. If a rate cap was to be imposed it would result in legitimate lenders not catering for the large section of potential borrowers who need to borrow less than the minimum loan amount that the capped rate makes financially viable for the lender to offer, as can be seen in France and Germany where rate-capping has seen an increase in illegal lending by (properly termed) loan sharks. When I researched this issue about 2 years ago for another thread, the incidence of illegal lending in Germany was 2.5 times higher, and that in France was 3 times higher, than in the UK.

http://www.theanswerb...e/Question855501.html

[anotheoldgit]

// As for putting a cap on rents, I can't see how it would work. Would it be so much per square metre? Would it vary by quality of the room? Or the location? ///

There doesn't seem any problem when one puts their house up for sale, a valuer comes round and puts a price on it surely.

[Gromit]

A rent is worth what anyone is willing to pay.

if you owned an asset, would you be happy that there were regulations imposed to stop you realising its potential profit?