Since payday loans first fell under the remit of the Financial Conduct Authority in April 2014, the number of complaints about their malpractice has gone down.
Historically, complaints about payday loan providers have been rife, with customers being charged far more than the initial borrowed sum just in charges and with accusations being thrown around about general malpractice. Payday loan companies were accused of running business models based around inflating the cost of loans given out to those who couldnít afford to pay them back, racking up extra charges and rolling the loans over.
As soon as they gained regulatory control over payday loan providers, the FCA imposed restrictions banning them from rolling a loan over more than twice and from making more than two failed attempts to take money from the account of a borrower.
In January 2015, the FCA imposed further restrictions, capping the cost of payday loans so that borrowers will no longer have to ever pay more than the value of the loan back in interest charges.
In the three months between January and March 2015, the number of complaints regarding payday loans in England and Wales has fallen by 45% compared to the same period in 2014, from 10,155 to 5,554. This marks an incredible positive turnaround in the much maligned industry, though Citizens Advice have maintained the importance of keeping a ìwatchful eyeî on it.
Citizens Advice have further expressed worry and called for reform regarding other costly financial products like logbook loans.
Taking out a logbook loan is like visiting a pawnbroker; when you take one out you put up property like your car as a deposit. Ownership of the car transfers entirely to the loan provider until the debt has been repaid.
Logbook loans are, like payday loans, often sold with particularly high interest rates, fees and charges, and the providers have been accused of excessively heavy handed debt collection.
So, while there are still problems with short term and high interest loans, the situation looks like its improving. Gillian Guy, chief executive of Citizens Advice, has said: ìthe drop in the number of problems reported to us about payday loans is good news for consumers and demonstrates the impact a strong stance against irresponsible lending can have on peopleís lives.î
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