Crackdown on Payday loans has saved people millions – Could unarranged overdraft fees could be next?

Payday loans net, loans direct lender is an FCA (Financial Conduct Authority) authorised lender. We enable you to borrow amounts between £200 to £2,000, should you pass the affordability checks. The FCA regulates the financial market, and has cracked down on issues related to lending. We bring you this article about unarranged overdraft fees, in advance of possible reforms to unarranged overdraft fees.


The FCA introduced stricter rules for payday lenders in 2014. Britain’s financial regulator says that the crackdown on payday lending is effective. It is currently saving customers that are vulnerable £150 million a year in fees. As a part of its review into lending, the FCA also looked at the way the cap on payday loans worked.

The Financial Conduct Authority (FCA) has revealed that a review of its payday loan cost cap, initially introduced in 2015 had delivered “substantial benefits” to consumers. The FCA has discovered that more than 750,000 borrowers are saving a total of £150 million per year. The typical cost of a high-income loan has dropped to approximately £60, the FCA said. High-interest, short-term loans – called “payday loans” which people often took out to cover unexpected expenses until payday – thrived following the 2008 credit crisis.

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The Office of Fair Trading, which regulated the industry until 2014, discovered that this type of lending had caused much stress and financial difficulties to many borrowers. Especially borrowers who found themselves drowning in debt. If calculated yearly – while loans were short-term, interest may be up to 5,000 percent. There have been several campaigns against the short-term lending sector, including payday uk loans. The FCA took over the regulation of the business in 2014 and put some caps into place to protect the borrowers. Many companies in the industry have been forced to repay more than £300 million in lending and fines since then. Also, more than 1000 lenders have gone out of business since then.

The FCA has instituted the cap, which limits daily interest to 0.8 percent a day of the sum borrowed. This means that the maximum the borrower pays at the end of the day is no more than twice the amount that they borrowed in the first place has been extremely effective. Firms are much less likely to lend to clients who cannot afford to repay. Debt charities will also be seeing fewer customers with debt problems linked to high-cost short-term credit. As a result, the FCA will review the policy again in 2020 and is currently leaving the price cap in place.


Overdrafts – unarranged overdraft fees


When talking about unarranged overdraft fees – banks must make ‘fundamental changes’. The FCA is happy with its activities and progress in the high-price, short-term lending market. However, the regulator says it currently has concerns about other areas of lending with unplanned overdrafts. The FCA has seen success in combating issues with the short-term lending sector with the caps that they placed. They have also suggested a cap on unplanned fees.

The FCA launched a review of unarranged overdraft fees at the end of last year. They found that unarranged overdraft fees can cost up to eight times as much as the cost of taking a payday loan. Placing a cap on these fees may solve these aggravations.


The Competition and Markets Authority (CMA) found that banks make over 1 billion pounds from unarranged overdraft fees. Sometimes, bank customers can become overdrawn. If they haven’t pre-arranged an overdraft and become overdrawn, they can face charges. These charges are around £6 per day at some High Street lenders. The FCA says unplanned overdraft fees are complicated. Those who accidentally find themselves in a position that requires them to access overdrafts are unaware of the exact price they will need to pay.

The FCA warns that there may be a need for some fundamental changes in the “unarranged overdraft” system. Bank must make fundamental changes in how they provide unarranged overdrafts. It seems that we have come to a point where the problem with unarranged overdraft fees has become a serious and problematic issue. The FCA cannot ignore it any longer. Therefore, it is important to solve these problems while maintaining the areas of the market that customers find useful. Lloyds Bank has already announced that it was scrapping unplanned fees. It is a pre-emptive move ahead of an expected crackdown by the FCA.


Buy on credit

High-cost credit products are still under speculation. There is concern where customers pay “rent” on big-ticket items such as a refrigerator or TV while they are paying off the entire price. Another worry is the catalogue credit sectors or door-to-door lenders; where catalogue retailers offer credit to people purchasing their products. High-cost credit products remain a key focus due to the dangers they pose to potentially vulnerable customers.

Thankfully it is encouraging to see evidence of improvement in the payday lending market. Ths is all the more so following a time when companies’ treatment of clients and their business models were frequently unacceptable. However, it is evident that we can do more. This review is all about identifying the areas where customers may be suffering harm. Evidently, this is so that we can be aware of necessary improvements that we can implement. The FCA is currently looking at the motor finance market, which has grown in recent years, to assess whether customers are in danger. Many people are buying three or four times more products than they would if they used cash. The FCA has suggested that one option might be for housing associations to provide these products along with the house or apartment.


There have also been considerations to cap the price on rent-to-own arrangements, in addition to concern about the motor fund, a worry already highlighted by the Bank of England. As a result, the FCA is investigating affordability tests and the transparency of terms being investigated.

Buy on credit

The FCA will publish a review of this work in the first quarter of 2018. The FCA has said that they consider that direct consumer risk exposure may be more limited. However, it may be heightened where there has been an insufficient assessment of affordability and a lack of clarity for the consumer in their comprehension of the contract. We can conclude that the FCA has been instrumental in protecting consumers from unfair treatment and interest rates. The FCA are making changes in society. They aim to ensure that lenders treat consumers fairly. Payday loans net, one of several payday direct lenders, has safeguards in place to provide customers with a fair lending service.


PUBLISHED BY
Tracy Walter
Tracy is an avid hiker who loves to explore nature. As a child, Tracy went on skiing holidays in the Swiss Alps during the winter which inspired her passion for nature. She is a tour guide by profession, and especially enjoys it when she guides foreign groups. In her spare time, she likes to write whilst sitting on her 4th floor balcony in London City. Tracy’s baby keeps her busy with whatever time she has left.