An important amendment to the Financial Services Bill will be debated in the House of Lords today.
Although most votes in the House mirror those in the House of Commons, the legislation, targeting the rise of payday loans and ‘financial loan sharks’ has been hailed as one of the more important debates in recent years and apparently the Church could hold an important sway in the matter,
Commenting that: ‘It is a sin to charge that level of interest. It is just morally wrong’, many newspapers suggest that the newly elected Archbishop of Canterbury’s pledge to support the amendment has tip the vote in favour of its Labour supporters.
After last week’s series of defeats on the Justice and Security Bill, the Right Reverend Justin Welby condemnation could attract those cross-benchers and rebellious Liberal Democrat peers and sink the government’s shaking ship.
Whilst campaigners and newspapers often indiscriminately condemn payday loan companies and have hailed Welby’s moral condemnation, it is necessary to keep a political perspective on the matter.
Although campaigners have accused Ministers of dragging their heels on the issue, David Cameron has taken action against irresponsible practices by recently giving the Office of Fair Trading new powers to suspend licenses where practices were ‘not acceptable’..
When online payday loan deals can be completed in under an hour and see victims paying £290.78 just 14 days after borrowing £250, this an important political issue that shouldn’t be clouded by moralistic judgment in newspapers or religious overtones.
Today, MP’s are set offer a helping hand to borrowers stranded in debt with a law that will give regulators the power to cap rates of interest.
Many newspapers have immediately commended the bill as a way of saving people from the barrage of adverts from companies such as Wonga that offer easy credit on pay-day loans.
However, when an official study in 2010 from the Office of Fair Trading said payday loans provided a legitimate, useful, service it is unwise to tar all payday loan companies with the same brush. For many MP’s this is a step forward in tackling: ‘an industry run by cowboys on the fringes of legality’, but the survey shows companies help to cover a gap in the market.
This comment made by Lord Mitchell, a Labour peer in the House of Lords who clearly believes in the power of the bill, stating:
“The losers are clearly the loan sharks and the payday lending companies. They have tried every trick in the book to keep this legislation from being approved and they have failed. Their failure is our victory.”
Whilst the legislation aims to cap annual APR’s that companies such as QuickQuid and Payday Express have been said to charge the Bill is far from perfect. When the new law does not set a top interest rate and won’t come into force before 2014 it’s a long time before the borrowers will see the benefit.
This delay gives ample time for borrowers to sink into debt and new ones to get attacked by one of these payday companies, indiscriminately branded by papers as malicious ‘loan sharks’.
Hopefully the amendment will tackle any mal-practice in the payday loan industry. However the actions of some cynical money-lenders shouldn’t justify measures that could damage to a useful industry that can help people in need of credit.
A much anticipated report into the payday loan industry has thrown it into the media spotlight. Conducted by the Office of Fair Trading, it will shine a torch on the claims of malpractice in the industry. Due to be delivered in March 6th it’s clear that many are set ideas about what they expect to find.
Spurred by concern over malpractice in the industry many are quick to equate people’s financial struggles and increasing levels of debt with so-called dodgy payday loan companies.
With The University of East London planning to ban payday loans ads across its campus because they think these are causing vulnerable students into spirals of debt it seems there is a distinct and indiscriminate culture of fear surrounding the industry. A rise in complaints from debt charities and new concern that the under-25s are now more vulnerable has increased anticipation of the report’s results.
At umberellaloans.com we too are fiercely interested but will be approaching it with a more even head instead of looking to confirm pre-conceptions of exploitative payday loans companies. Hopefully it will both help to identify some of the problems and amend some of the imbalanced views of the industry.
Following the investigation that started in February of this year, the Office of Fair Trading has published an interim report, giving indication what changes the payday loan industry will be facing.
All 240 payday loan companies currently operating within the industry were looked at and 50 major lenders were contacted in order to be monitored more closely. OFT acted as a result of growing concern, that the industry’s bad business practices and lack of regulation is pushing vulnerable consumers into financial difficulty.
The main areas of investigation covered; CPA (Continuous Payment Authority), insufficient affordability and credit checking and overly aggressive debt collection methods.
Russell Hamblin Boone, Chief Executive of Consumer Finance Association, trade association representing the payday loan lenders, expressed CFAs views saying that members show support and are happy to co-operate with OFT and believes that the smaller firms are the ones misbehaving. Mr Hamblin Boone believes that the new Code of Practices that has come to force as of this week will set higher standards for the industry thus improving its behaviour. He said â€œOur biggest advocates are our customers themselves. So as well as highlighting areas of poor practice, the final report must acknowledge the high levels of satisfaction and the value our customers place on short-term credit products.â€
Newspapers had a field day covering this story with persistent contempt towards the industry, uninterested the payday loan lenders and large number of customersâ€™ points of view. Few extreme cases of completely unethical lending practices were shown as example, portrayed as industry norm, accentuated with strong and misleading use of language â€œpeople are forced to take out loansâ€ bringing a distorted picture of the situation to its readers.
Umbrella Loans Ltd takes the concerns surrounding the payday loan industry seriously and supports the idea that tougher regulations must be implemented. The payday loan industry does need â€œcleaning upâ€ so that the companies following the rules and practicing responsible lending will not be continuously hounded by bad publicity. It is however unhelpful to both consumers and the industry to deliberately portray lenders as â€œlegal loan sharksâ€. Responsible borrowers that use the service as its intended â€“ for a short term solution, should not be treated as if they are incapable to make decisions for themselves.
Merle Oper, MD of Umbrella Loans Ltd says: â€œIt is illogical to think that a company with a long term vision profits from non-paying customers and deliberately targets them. Umbrella Loans has used OFT guidelines as standard business practice from inception of the business in 2010. As well as setting the credit scoring to reject clients with obvious financial difficulties, we speak with each potential customer as part of our underwriting process; in order to establish their personal financial circumstances and advise them to communicate with us throughout the process, especially should their position change during the contract period. The aim is to work with our clients, offering them reasonable solutions in case they find themselves struggling to pay on agreed time. We want to create satisfied client base that will not use our services to support irresponsible lifestyle of spiralling debt, but will turn to us for short term financial needs.â€
Last week the news was filled with spin off stories based on a report published by Insolvency Service on 2nd November. The report covered all areas of business and consumer finances from high street to corporate bodies and consumers, showing the annual figures and few reasons for any of us to cheer.
Various newspapers however have chosen to concentrate their focus on one area only, taking it out of the context and separating from the overall picture, this area once again being Payday Loans. According to the report 13% of the Payday Loan Clients are choosing to go without food in order to pay for the loans. Surely this has created very angry headlines questioning the integrity of the industry once again questioning whether ethical payday loan lenders exist at all.
As a company that considers themselves highly ethical, Umbrella Loans points out that payday lending is a valid and necessary service for responsible users. By responsible users we mean people who can afford to take out such a loan, and will do it in case of emergency and not as a continuous way of supporting their lifestyle. This simply cannot be said enough, and it is down to loan companies to make sure their lending criteria is adjusted accordingly.
Based on the named report there are still a large % of payday loan customers who have in excess of 5 payday loans outstanding and yet they are able to get further credit from some loan companies. These issues are currently set out in OFT guidelines, and reputable and ethical Payday Loan firms like ourselves, have been using these as business practice from day one.
We also believe that more has to be done in order to inform consumers of their rights and options when dealing with debt. The claim that 13% of consumers using the services of payday loan companies choose to pay their debt to the loan companies instead of buying food, is showing either that those are extremely conscientious individuals, or they simply don’t know their rights as consumers. The information is readily available through government debt advise websites and other mediums. The simple fact is that unlike loan sharks, who the media so eagerly want to compare loan companies with, the payday loan lenders are in fact regulated by OFT and will operate within the law. Which for consumers means that their circumstances will have to be considered when negotiating paying back debt.
For more free debt advice visit: http://www.nationaldebtline.co.uk
As the news keeps telling is on a daily basis there are far too many payday loan lenders popping up so it is difficult to know who you can trust and who you can’t.
Here at Umbrella Loans we consider ourselves to be different from the typical payday loan provider you hear about all of the time. Now cynics out there will say that we’re bound to say that, we want the business and while that is true, even irresponsible lenders can say what they like, we really are different and this is why:
We are ethical lenders “ we consider each of our applicants carefully and will only approve the loan if we believe they are going to be in a position to pay the money back in the time
We keep lines of communication open “ if someone falls behind with a payment we aim to negotiate a reasonable solution to help get the customer back on track
We aim to build relationships “ we aren’t the same as some “online shops” you can find when doing searches online
We will only lend up to £500 “ people may believe this isn’t enough but we aim to prevent people from getting into debt that they can’t get out which is why we will only lend our applicants up to £500
We don’t hide our APR “ the amount you will be required to pay back on your payday loan from us is explained from the beginning so you will know from the get go what you will be expected to pay and how long you get to pay it
We have a physical office “ one thing you will notice about a lot of the payday loan sites you find on the internet is that they are completely devoid of personal information such as names and addressed. Here at Umbrella Loans we don’t hide who we are or where we are. We are based in the North West of England and we are run by Charlotte White
We are a member of BCCA “ The BCCA are a long established and respected trade organisation and membership is both highly sought and also rigorously scrutinized via a lengthy application process.
Follow this link to apply for a payday loan today.
Irresponsible lenders who are operating within the payday loan industry are tarnishing the reputation of those companies who lend responsibly and act with a well developed moral compass, and remain within the complex network of legislative compliance and industry codes of conduct. Millions of people are now using payday loans and yes, the APR can seem high but when people make this point they are not explaining the whole picture.
APR stands for Annualised Percentage Rate and payday loan companies are obliged to display their costs in this way. If banks had to display the relative APR rates that their charges equate to, after spending just beyond your overdraft limits, the APR would be comparable and most likely in excess of, that of a payday loan expressed through APR.
If banks were to offer payday loans (of some description) in the future, would they be required to follow all the same requirements of reputable payday loan companies? Or might they invent an entirely new product to avoid having to be constrained in the same way as payday loan companies are currently. Perhaps this is a cynical perspective but one that responsible payday loan companies are aware could happen.
So the hype and scaremongering that we see in the press and from certain organisations around the payday loans industry is partially unwarranted. There are irresponsible lenders who operate in this industry and these should be dealt with promptly and decisively by the appropriate authorities. However, there are also responsible lenders operating within all the constraints, guidelines, legislative frameworks and requirements that, quite rightly exist, to protect consumers and to regulate the payday loans industry.
Banks will soon be seeking to recover the money that they have had to put aside for miss-selling PPI. Original estimates are now below what banks have already paid out to customers who were miss-sold PPI. They may well recover these huge losses under the radar by increasing fees for credit facilities like overdrafts and possibly by introducing new products to sell in a fast growing area of the financial industry – payday loans. The members of parliament that come heavy onus Â and want to banish the online payday loan industry, are fortunate to not be in the financial predicament that some families face when they have an emergency and need a short term loan or payday loan to get them through.
The National Farmers Union (NFU) have reported that English wheat yields are down by 14% and that the level of productivity is almost as low as was seen in the 1980′s. If we put this into context alongside a very wet British summer, drought conditions in the Americas and a heat wave in eastern Europe and parts of Asia this year, the end result is going to be a marked increase in the costs of basic food stuffs.
The NFU along with the British Retail Consortium expects that the price of fruit and vegetables and grain will increase. Certain meats like poultry and pork are also likely to cost more.
The double dip recession in the UK adds yet further burden to the difficulties that ordinary British households are facing. With energy costs increasing too, the pressure on domestic budgets continues to spiral upwards.
In these times of difficulty people are turning to payday loan lenders to help them put food on the table but people need to be aware that there are irresponsible lenders in the payday loan industry and their actions do nothing to improve the industry’s reputation.
Responsible lenders in the payday loan sector have no hidden charges and are transparent about fees. Used responsibly, payday loans are an excellent solution to emergency costs and should be used wisely as a short term remedy to financial hardship.
People who use payday loans should consider their commitment in the same way as they would when borrowing from other sources. If they are unsure about being able to repay their loan by the repayment deadline, then they should really consider other solutions to their situation.
Energy providers British Gas, npower, SSE and Scottish Power have recently announced further price increases, just in time for winter. Prices are set to increase by an average of around 7% and 2.3 million households whose power is supplied by Scottish Power will increase. Scottish Power’s 700,000 customers who are on capped or fixed rate deals will not see their prices rise this time around.
As a result of theÂ spiralingÂ price increases for fuel, more and more people in the UK are going to find themselves heading towards fuel poverty as winter approaches.
Households in the UK who find themselves struggling to pay their fuel bills this winter, might decide to take out a payday loan to help them through the tough financial pressures that these price increases are going to bring.
The large conglomerates like British Gas continue to get away with charging more and more for their products, whilst they also generate huge profits. Â It is totally imbalanced when so many people are going to genuinely struggle to find enough money to pay their gas and electricity bills.
There are numerous articles in the media placing the blame of consumers financial difficulty on payday loan companies and the services they offer. Umbrella Loans Ltd feels very strongly about this topic as having to use payday loans is the result and not the start of struggling customers financial difficulties.
Umbrella Loans’s payday loans offer a sustainable and responsible approach to lending which could help people through short term difficult financial circumstances this winter. We give clear information about how our payday loans work and about our fees and charges. We do not encourage customers to take out additional loans they cannot afford. We carry out credit assessments to check affordability, and we are clear about how repayments are to be made by our customers. We do not abuse continuous payment authority collections, and are ethical lenders. Please read our website which details our terms and policies.
The OFT (Office of Fair Trading) have promised to publish the results of their investigation into the payday loan sector by end of 2012.
The first quarter of 2012 saw the payday loans industry being heavily criticized by consumer protection groups, media and bank lobbyist. This in return lead to the OFT commencing a formal investigation into the whole sector, mainly in order to establish if the industry was to continue be self-regulated, but also to look at finer details of how the industry operates. Main areas of concern being continuous payment authority, unlimited roll overs, high interest rates, target marketing and lending to vulnerable customers along with insufficient credit checking.
During the investigation in excess of 70 payday loan companies were investigated and few were immediately stripped of their Consumer Credit Licenses to show that the OFT is taking this seriously. The full OFT report and subsequent rulings are expected to be announced during the last quarter of 2012.
During the OFT formal review of the industry in 2010 capping the interest rates was ruled out and it will be interesting to see if regulators have changed their mind with regards to this, although at this stage it is unlikely to happen.
In the meantime, some indication has filtered through that the main areas that will see changes are continuous payment authority and amount of roll overs, which means that ethical payday loan lenders like Umbrella Loans Ltd will not be affected. However it will be financially very noticeable for companies who have been abusing this for years.
Within the industry, this year has been labelled â€œSurvival of the Fittestâ€ and rightly so, as the rogue element within the payday loan industry needs to be eliminated in order for the service that is clearly necessary to continue and to be less stigmatised.