Which?: 'Payday loans market rife with poor practice
A new Which? Money investigation has uncovered widespread poor practice in the payday loans market.
Failings unveiled by the research included potential breaches of the Consumer Credit Act, poor privacy provisions and inflated APRs.
With the take up of payday loans on the increase, we've reported two lenders - Paydaykong.com and Swiftmoney.co.uk - to the Office of Fair Trading (OFT).
What is a Pay Day Loan?
A 'Pay Day' Loan is a short term loan taken out for anything up to a month with the amount borrowed being paid off in full by debit card on pay day. However some firms will allow a smaller payment to be made and convert the outstanding balance into a loan to be repaid over a longer period. Loans usually range from £80 to £750.
What is the interest rate on 'Pay Day' loans?
Generally, you will be charged £25 for every £100 borrowed which equates to an interest rate in this case of 25%. This is fine if the amount borrowed is paid off ‘on Pay Day’ i.e. 31 days later but if it is not, the interest continues to build on the outstanding balance and this is where the problems start.
Lenders are required to clearly state what the APR is to two thirds of their customers on their loans and in the circumstances above this could range from 1,355% to as much as 1,845% depending on the lender used, the amount borrowed and the term.
Why do people go to Pay Day Loan firms?
Due to circumstances many individuals are left with no form of credit. Many of those applying would be usually be turned down by main High Street lenders. When they need money to pay for car servicing, replace a broken washing machine or oven, for example or are under pressure to pay a bill to avoid court action they may be panicked into taking what seems to them to be an easy way out.
Consequently, and especially in the current economic climate, these firms are seeing an upturn in business.
Read more on the Debtwizard guide to payday loans
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Say Not To PayDay Loans Campaign
Interested in signing a petition to ban PayDay loans then visit the official website of Steve Perry, himself a victim of 60 such PayDay loans.
What are PayDay loans? What are the benefits? Why are they considered so dangerous by many? Most importantly what happens when it all goes wrong, and how do you as a consumer get yourself back out of trouble.
The following website with a video link will talk you through the loan process & the pro's and con's. It will dismantle phrases like responsible lending and rollover loans and give you an insight into just what regulatory changes they are campaigning for.
Say No To Payday Loans Official Website
