Latest Financial News

Payday loans: New law to cap interest & fees

Payday loan firms have received heavy criticism in recent months due to targeting vulnerable customers with loans charging high amounts of interest and other fees to individuals often already considered in financial difficulty in need of debt advice and debt management help.

Ministers have now publically announced that the government will introduce a new law to limit the cost of payday loans as the industry comes under mounting scrutiny. Treasury officials explained there is “growing evidence” internationally in support of the move.

The Financial Conduct Authority (FCA), who regulates the payday loan industry, has not yet announced the level of the cap on the payday loans.

George Osborne explained the next logical step would be to control the overall cost of credit, including the arrangement, rollover and penalty fees, as well as on interest rates. The cap will be included in the Banking Reform Bill, which is already going through Parliament.

Some payday lenders have been criticised for charging more than 5,000% annual interest – though the lenders say these payday loans are meant to be short-term, so the annual rate can make charges appear worse than they are.

The Financial Conduct Authority has already been given the power to cap the costs of payday loans, but under the new law, the FCA will now have a duty to go ahead and introduce price controls. The FCA told payday lenders tougher regulation would soon be implemented. It said all borrowers should have an “affordability” check before being given a loan and suggested risk warnings should be put on adverts.

At Burgess Bowen Financial Management, we help people resolve unaffordable payday loan debt by offering a payday loans debt help solution tailored to your individual circumstances. It is important that you carefully consider all the advantages and disadvantages of any debt solution service. It is also recommended that you speak with the Money Advice Service who offer free and impartial debt advice.

Complete our application form and an experienced debt advisor will call you straight back to let or call us on 0800 917 5104.

Payday Loan lenders are now facing tougher regulation

Payday lenders have been warned that tougher rules will be implements to protect consumers.

The Financial Conduct Authority (FCA) has in short proposed that anyone who intends to borrow from a payday lender will need to have an “affordability” check before they can be given a payday loan. In addition the Financial Conduct Authority wants to risk warnings clearly displayed on payday lending adverts and marketing material.

As you might expect, the payday loan industry have given the plans a cautious welcome, saying irresponsible lenders would struggle to comply to the new rules whilst maintaining a profitable commercial enterprise.

The FCA’s chief executive & spokesperson Mr Martin Wheatley said: “Today I’m putting payday lenders on notice: tougher regulation is coming and I expect them all to make changes so that consumers get a fair outcome. The clock is ticking.”

The proposals mean that anyone interested in taking out a payday loan would need to prove that they could afford to repay it as part of the affordability check.

The Financial Conduct Authority has also suggested that:

  • Payday Lenders will not be able to extend, or “roll over”, payday loans more than twice.
  • The number of attempts a payday lender can debit money out of a borrower’s account using a Continuous Payment Authority (CPA) should be limited to twice per day.
  • Anyone extending a payday loan should be told about free debt advice such as the Money Advice Service.
  • The Financial Conduct Authority could order lenders to change misleading adverts, or drop products that are not in the best interests of consumers.

The Financial Conduct Authority said it did not want to completely stop people considering using payday lenders, as they may turn to illegal loan sharks instead – which wouldn’t be anyone’s interest.

“We believe that payday lending has a place; many people make use of these loans and pay off their debt without a hitch, so we don’t want to stop that happening,” said Mr Martin Wheatley.

When the Financial Conduct Authority takes over responsibility as the new regulator for consumer credit in April 2014, it may also consider whether to implement a cap, or limit, on the amount of interest that lenders can apply to a loan.

The payday loan companies will need to understand that they may be shut down overnight if they do not comply with the new rules & Regulations.

The current regulator, the Office of Fair Trading (OFT), wrote to 50 payday lenders earlier this year to see if they were suitable to continue in business, as a result 19 payday lenders withdrew from the payday loan market as a result however it is thought that there are still more than 200 firms offering short-term payday loans within a matter of minutes.

At Burgess Bowen Financial Management, we help people resolve unaffordable payday loan debt by offering a payday loans debt help solution tailored to your individual circumstances. It is important that you carefully consider all the advantages and disadvantages of any debt solution service. It is also recommended that you speak with the Money Advice who offer free and impartial debt advice.

Complete our application form and an experienced debt advisor will call you straight back to let or call us on 0800 917 5104.

17 Million admit neglecting their financial wellbeing

Despite their best intentions, 17 million adults (35%) admit to neglecting their finances.

The second annual Scottish Widows Priorities of Life Index shows that of the 17 million adults who cannot focus on their finances as much as they’d like, 21% said this was because they had too much debt to feel financially secure, 32% are not paid enough, and a quarter (25%) simply try not to think about money in their day to day lives.

Commenting, Iain McGowan, savings expert for Scottish Widows, said: “Our financial security and savings are suffering as we struggle to prioritise what really matters when it comes to financial stability. We all know how important it is to save and make time to look after money worries, but a 35% of all of us admit our financial security or savings are not being prioritised nearly enough.”

Around 19 million people (38%) say they are focusing less on their savings than they would like, of which 11 million (60%) say this is because they can’t afford to save more than they currently are, and 6 million (33%) only focus on their short term finances at the moment. And 11% of all Brits say the one thing they wish they had more time for was saving for the future.

But when it comes to prioritising essential life admin, one third (33%) of people have less than two hours to devote to their most important priorities outside their everyday routine of working, eating and sleeping, with those between 35 – 54 years old having the least amount of time to do this. Ideally, people would have an extra 3.5 hours each day to spend with their family, on their health and doing their hobbies, but their current lifestyle doesn’t allow for this.

If people were given an extra day a year for ‘life admin’, 17% said they would use it to make sure their finances were in order, 14% said they would spend the time making a realistic budget, and one fifth (21%) said they would make sure they were paying the lowest household bills possible.

Iain McGowan continued: “Even though the recession may be officially over, the importance of having a financial cushion to fall back on is at the front of a lot of peoples’ minds, but time and money constraints prevent them from being able to do the things they need to in order to feel as secure as they would like.

“It’s extremely worrying that so many people bury their heads in the sand. By carefully planning their finances for the future, they could avoid a lot of this worry in the long-term.”