Is the death of Payday Loans approaching? The number of authorised payday-loan companies has dropped from 240 to just 60, and the value of loans made has fallen by 70% in the last 3 years. The tighter controls introduced in 2014-15, which drastically reduced the profit-margins of the loan companies, has been credited with making the industry less attractive to many companies.
This Is Money reports –
“Around 1.8million loans were issued last year, down from ten million just three years earlier, according to the chief executive of the Consumer Finance Association, Russell Hamblin-Boone… ‘Margins are very small now and we have seen a reduction in the market as a result of the regulation and price control,’ he said… Stringent controls were placed on payday lenders in 2014 and 2015, in an attempt to protect borrowers from eye-watering fees and debts spiralling out of control… The new rules mean that borrowers incur no additional charges over and above 0.8 per cent interest per day… The maximum penalty that a lender can charge a customer who misses a payment is £15 over the length of the loan… The loan cost cannot escalate in interest beyond 100 per cent of the amount borrowed in the first place… Loans still incur very high levels of interest. However lenders are obliged to make sure that their customers can afford them and are treated fairly if they fall into difficulties… The new rules mean that for many firms operating in this area, offering payday loans was no longer profitable.”