Good news for the payday loan industry, for both lenders and borrowers! The FCA payday loans review has concluded that the market is safer, loans are cheaper, and less people are struggling with payday loan debt.
We were so delighted to hear this that we just had to share. Paydayloansnet.co.uk have been working for a long time to provide safer and affordable payday loans. We recognise that sometimes, you just need a small cash advance to get you through to payday. Being a new direct lender, we entered a market that was already strictly regulated, giving us a chance to form a safe and compliant business model from the start.
The news from the FCA payday loans review that these regulations appear to have been successful is very good news. As a payday lender who genuinely cares about its customers, we are very pleased indeed that high cost short term credit (HCSTC) borrowers in the UK are getting a better deal now. What exactly did the FCA’s review find?
One significant finding is that the cost of a typical payday loan has dropped from over £100 to approximately £60. This is wonderful news for borrowers. Looking at this nationally, 760,000 borrowers are collectively saving £150m a year. The caps have effectively made payday loans a far more affordable and reasonable credit option.
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But are people still struggling to repay their loans? To answer this, the FCA payday loans review examined the number of people who contacted debt charities, seeking help with HCSTC problems. StepChange experienced a drop of 30% in clients with HCSTC debt from 2013 to 2016, while Citizens Advice saw a drop of 60% after 2014. This certainly seems to point to the fact that many more people are able to cope with their payday loan debts, and payday lenders are not lending to those who can’t.
New Business Models
Previously, a large part of loan firms’ revenue was from charges and interests applied to late or missed payments. Now, lenders are being far more selective about who they lend to. Default rates are much lower – in 2016, they were around a third of what they had been in 2014, and the income received from late or missed payments is half of what it used to be.
For businesses to survive in these new conditions, their methods must undergo a drastic shift. However, Paydayloansnow.co.uk is a new direct lender. We have never had to adjust the way we work to be able to operate in the new marketplace.
So, at Paydayloansnet.co.uk, out business model relies on borrowers meeting their repayments successfully. To this end, we do all we can to ensure that each applicant will find our loans affordable, and if a borrower is struggling to meet a repayment, we work with them to create a repayment plan that will work for them.
FCA Regulations and Paydayloansnet.co.uk
We decided to take a closer look at our own business to see how the cap had affected different areas. Here are the results of our inspection:
|Type of loan||Impact of cap|
|Payday loans in the UK||Paydayloansnet.co.uk is committed to providing fast and flexible UK payday loans to UK citizens. We want our products to help our borrowers as much as possible; we’re here to help, not put you in more debt. As is evident from the drop in the number of people turning to debt charities for help, new UK payday loans have on the whole become far safer and affordable under the new laws.|
|Payday direct lenders||As a new payday loans direct lender, Paydayloansnet.co.uk had the unique opportunity to structure our business model in line with the regulations from the beginning. This has allowed us to optimise our instant decision payday loans and provide far more flexibility to our customers, who are finding payday loans to be cheaper than ever.|
|No credit check loans||As a responsible lender, Paydayloansnet.co.uk do not offer no credit check payday loans. We do offer poor credit payday loans, but we will still check your credit history. We want to ensure that our loans will help you, not make your situation worse. Therefore, we are pleased that under the FCA’s regulations, no credit check loans are illegal; every lender must perform a credit check on every applicant.|
|Loans online||While offering no guarantor payday loans online allows for speedy decisions and same day payouts, it also makes applying very easy. Borrowing money should always be a well-thought out decision. This is why Paydayloansnet.co.uk make sure to provide all the details of your loan clearly before you press apply. By enforcing stricter affordability and credit checks, the FCA have ensured that lenders will only lend to people who can afford the loan, saving those who would otherwise make hasty loan decisions online that they would later regret.|
As the table above makes clear, the HCSTC market has undergone drastic changes. Many lenders were unable to adjust and closed their doors – as many as 188 firms that had initially applied for a full FCA authorisation to operate in this market withdrew their applications. These are lenders who would otherwise have charged much higher fees and interest rates, and so therefore would not be able to survive in the new market.
FCA Payday Loans Review: A Summary
At Paydayloansnet.co.uk, we are very satisfied with the results of the FCA payday loans review. If people have access to safe and affordable short term credit, they are able to tide over bad patches without ending up in serious financial trouble. As of now, the FCA are happy with the current regulations. They have therefore decided to keep the current caps, and there will be another review in 2020.
Paydayloansnet.co.uk hope to continue providing UK citizens with a new and better option for their short term credit needs.