LONDON, April 8, 2013 /PRNewswire/ --
In March, the Office of Fair Trading (OFT) released their report on the payday loans industry. This quickly became front page news, as it promised firm action on non-compliant payday loan companies.
The main findings were that payday lenders were overly focused on speed and ease of application rather than on cost, which led to competition focusing on these factors. In some cases, it was actually not in lenders' best interests to perform full affordability checks or credit checks, since it would slow down the applications and make them less competitive.
They also registered concerns over the amount of rollovers that customers were able to take, and pointed out that while less than 5% of borrowers rolled over four or more times, this made up almost 20% of the lender's income.
They also promised to crack down on misleading information or lenders that encouraged irresponsible lending. The OFT will have new powers, including the ability to suspend or remove licences from lenders.
The OFT has written to lenders, giving them a deadline to make sure they reach certain levels of compliance, including making sure that representative examples are properly sized and portrayed and that the customer is given enough information in advance of applying for a loan.
As one of the UK's leading brokers, Payday Bank have voluntarily decided to put themselves under the same conditions as the lenders they work with and have agreed to make their websites and related brands up to the required level that the OFT require within the deadline.
As well as that, they will work on making sure to focus on giving the customer as much information as possible while encouraging responsible lending. This will include increasing the prominence of the APR and representative example, and making sure there is plenty of information about the consequences of non-payment or rolling over loans.
They also encourage all other brokers and affiliates to do the same.
A spokesperson said:
"We believe that more information and clarity is only a good thing for the industry. From customers to brokers and lenders - we think everyone benefits from a more transparent application process. We welcome this guidance from the OFT, and think that these new guidelines are much more clear, and look forward to implementing them."
Of course, this may impact the industry in other ways. Some industry experts are noticing an upswing in people applying for longer-term loans, such as 12 month loans. These are seen by many as a medium option between payday loans and long-term loans.
They allow applicants to apply for a larger amount than most payday loans, but with a longer repayment plan. This allows for more affordable monthly repayments, although does mean a larger overall repayment. For some, this is a more convenient way to borrow, as it is more manageable on a month-to-month basis than trying to repay the entire loan in a short period of time.
About Paydaybank.co.uk: Payday Bank (http://www.paydaybank.co.uk) was established in 2008 with the aim to help as many customers as possible with their short term cash needs. Applicants must be UK residents and at least 18 years old and in employment.
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SOURCE Payday Bank