Category Archives: Payday Loans

doorstep lenders

UK’s Doorstep Lenders Are Going Online In Search of Growth

UK’s traditional doorstep lenders are moving online to take advantage of what is clearly the next growth frontier. Doorstep payday loan lenders, whose agents have been collecting cash from borrowers in UK’s most hard-bitten neighbourhoods for decades, have finally seen the “light”.

The move comes in the wake of rate caps imposed by the financial watchdog as well as other regulatory restraints on payday loan lenders which have created a perfect opportunity. Doorstep lenders can now enter the online space with more transparent loan pricing as well as sustainable repayment terms which borrowers have desired for years.

Progress

Provident Financial, a FTSE 100 financial services company, was the first to lead the way through its online business, Satsuma, which offers loans repayable on a weekly basis. According to Provident Financial, all indications suggest Satsuma will break even this year paving way for profits and the launch of a new monthly repayment product. Morses Club will follow Provident Financial’s path when they launch an online loan before the end of the year. The company, which was listed on Aim in May 2016, is the 2nd largest doorstep lender with 200,000 customers. 

According to Morses Club C.E.O. Paul Smith, the company has a unique opportunity to get a new set of customers given the fact that Morses Club has been receiving over 125,000 website hits monthly, most of which (75%) are from individuals searching for online loans. Paul Smith is set to reveal the terms of his company’s new online loan product during Morses Club’s debut financial results release in early October.

Morses Club, which owns Shopacheck, listed its shares on the stock market when its private equity owners Rcapital floated 49% of the shares. Although the company’s share price fell immediately after the initial public offering, the shares have recovered recent weeks. On Friday, the share closed at 112.5p compared to a 108p float price.

The opportunities for doorstep lenders venturing online is enormous given the fact that the UK has over 12 million consumers who don’t meet the credit standards of mainstream banks. Traditional doorstep lenders currently service approximately a sixth of these customers (2 million customers). These borrowers are heavily reliant on irregular employment or benefits and have little to no credit history. These consumers are forced to depend on costly credit to settle emergency expenses as well as pay for special occasions like children’s birthdays. 

According to the C.E.O of Provident Financial, Peter Crook, doorstep lenders offered their services to nurses, teachers, and public sector workers a decade ago, however, these customers now have online loans as their only option. 

There are however skeptics that feel the move by doorstep lenders to go online carries additional risks. Subprime lenders like John Van Kuffeler, CEO of Non-Standard Finance which operates as Loans At Home claims that online lending won’t work effectively with the lower end of the 12 million customers who don’t meet the credit standards of mainstream banks. According to Kuffeler, meeting face-to-face is much better than having online engagements from a credit assessment standpoint. 

Kuffeler claims that lenders should do home credit, go door-to-door or use a branch-based system to ensure face-to-face engagements. Kuffeler’s concerns appear valid, however, the demand for short-term unsecured loans is too high. 

Before the credit crisis in 2008, UK’s small-value short-term unsecured loans market was valued at approximately £12bn with Lloyds, Barclays and many other high-street lenders active. When the credit crisis hit, credit conditions tightened causing the volume of short-term unsecured loans written by mainstream banks to hit record lows. 

Payday loan companies stepped in to fill the resulting vacuum. Doorstep lenders are poised to step in and fill the void created by payday loan companies today on the wake of rate caps among other regulatory restraints imposed on payday lenders by the financial watchdog. The new regulations are making it hard for traditional payday loan lenders to operate. 

Doorstep lenders have also realised that people are no longer willing to borrow and service their short-term unsecured loans traditionally. There is, however, need for caution if doorstep lenders expect to stand the test of time. Industry players like Panmure Gordon analyst Donald Tait expect Morses Club to approach online lending cautiously given the fact that rapid expansion of unsecured lending was the main cause of the collapse of Panmure Gordon’s former parent bank, London Scottish Bank back in 2008. 

All in all, the opportunity is there for doorstep lenders that will be able to match risk with loan pricing perfectly given the fact that the subprime market appears to suffer from a permanent recession sometimes.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

payday loan compensation

Is The Payday Loan Compensation Scheme Causing a Rise in Complaints?

According to a recent report from the Citizen’s Advice Bureau (CAB) around 76%
of people using payday loans could have cause to receive a refund or
compensation. Finding out if you are entitled to any form of recompense as a
payday loan customer could depend on several factors.

Recurring Payments: a third of complaints received by CAB were found to relate
to the way that payday loans are often set up with recurring payments.
Information about how to cancel such a payment should be provided up front as
well as a schedule for deducting payments. A reputable lender will offer these
details readily so you should be wary if this is not provided.

Fraudulent loans: with one in five people reporting that someone else has taken
out a payday loan in their name without their knowledge it is important to go
with a lender that makes thorough checks to confirm identity. If you find
yourself a victim of a fraudulent loan then contacting the lender should be the
first step. Giving them the details of the fraud should enable them to resolve
the problem for you. If that doesn’t happen the next course of action would be
to contact the Financial Ombudsman Service.

Harassment: This can difficult to prove as there is no real measure of
harassment in place. As a general rule lenders shouldn’t contact you at
unsociable hours and should be aware of any personal circumstances. Each
situation is different so some may find some actions more upsetting than others.
Unclear repayment amount: It is now imperative that when taking out a payday
loan you should be fully informed and aware of the repayment amount. The
repayment amount is likely to be considerably more than the amount borrowed but
a person needs to be notified formally of what it is to avoid repercussions at a
later date. This information should include dates when repayments will be made
along with how and they should be extremely clear and not lost in small print.

Affordability: Payday loans often get a bad press because it is thought they
take advantage of people who can’t pay. In fact lenders need to be confident
that the debt can be repaid at the outset otherwise they could be accused of
lending irresponsibly.

Repayment problems: If you are struggling to pay back a payday loan then you
should contact the lender directly with a repayment proposal. If this is
appropriate the lender may freeze interest and associated other charges. They
should also point you in the direction of companies offering free debt advice.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

fca cfo lending

CFO Lending Ordered to Pay Its Customers £34m By The FCA For Unfair Lending Practices

CFO Lending has been ordered by the Financial Conduct Authority (FCA) to pay £34m in redress to approximately 100,000 customers after the payday loans lender was found to be guilty of using shoddy lending practices dating back to the company’s inception in April, 2009. 

cfo lending

The company has agreed to a £34m redress package in light of unfair lending practices which range from miscalculating outstanding customer debts to making unauthorised withdrawals from customers’ bank accounts. The company is also guilty of sending threatening and misleading correspondence to customers as well as failing to treat customers facing financial difficult fairly. The payday loans lender is guilty of rejecting many payment plan proposals by customers in financial difficulty. 

The FCA also found CFO Lending to be guilty of providing inaccurate information to credit reference agencies and failing to assess the affordability of its loans, particularly guarantor loans, potentially damaging its customer’s chances of getting loans in the future. 

According to Jonathan Davidson, the Director of Supervision at the FCA, CFO Lending was guilty of treating its customers unfairly warranting the redress. The FCA is, however, confident CFO Lending will address its past mistakes accordingly going forward. 

The lender was banned from contacting its customers with outstanding loans in August 2014 while it commenced a total review of its business. On completing the review, the FCA gave the lender limited authorisation to pursue outstanding debts. The company is still barred from issuing new loans. 

CFO lending is the latest short-term lender to face the wrath of the FCA following widespread criticism about payday loan lenders. Cash Genie faced a similar fate in January 2016 after being forced to pay £20m to customers who had suffered because of the lenders’ unfair practices.

Who is eligible for compensation?

The redress scheme will benefit some CFO Lending customers as well as customers who have applied and received loans in the past through the lender’s other brands like; Flexible First, Money Resolve, Payday Advance, Payday Credit, Paycfo and Payday First. 

According to Mr. Davidson, affected customers will be contacted by March 2017. Customers who believe they are entitled to redress but aren’t contacted by March 2017 are free to contact CFO Lending (via phone on 0203 583 6303) after March 2017. £31.9 million worth of debts will be written off under the redress scheme. A further £2.9 million will be paid to eligible customers in the form of cash payments. 

Customers with outstanding loans with CFO Lending are expected to continue repaying them, however, no additional interest or any other fees will be added.

For more information, visit: http://www.cfolending.com/redress-3

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

google payday loan ad ban

The True Impact Of The Google Payday Loan Ad Ban

In May 2016, Google announced that starting July 13, they were going to ban payday loan ads that featured a high-interest rate (an APR OF 36% or higher) and a repayment period within 60 days or less from the date of issue.

This wasn’t the first time Google had made such a move. In the recent past, Google has been cracking down on ”questionable” product/service ads. In fact, Google disabled 780 million ads in 2015 for many reasons ranging from phishing to counterfeiting and obscenity. After doing away with porn ads, the latest victims are payday loans among other high-interest financial products/services.

Critics argue that Google has overstepped their boundary in their quest to ”protect” consumers. Google thinks otherwise. During Google’s initial update on the matter in May 2016, David Graff, Google’s Director of Global Product Policy said the move was inspired by Google’s quest to protect its users from deceptive or harmful products only thus the update didn’t affect other types of loans such as car loans, student loans, mortgages, commercial loans and revolving lines of credit such as credit cards.

It’s worth noting that Google had previously taken steps aimed at limiting payday loan ads. These steps were deemed adequate and appropriate. The new update is unnecessary and counterproductive. As discussed below, it will end up increasing the cost of borrowing for users. The update also introduces unnecessary hurdles for lenders, especially those in countries like the UK which already have adequate payday loan regulations in place. The FCA already regulates the UK payday loan industry.

Payday loan industry players in the UK must follow the payday loan guidelines, regulations as well as advertising standards in place or face stiff fines and/or website bans. This makes the UK payday loan industry as transparent as possible to consumers. The only thing this new regulation does is rob UK payday loan consumers the freedom of choice which will in turn make payday loans more expensive since the minimum loan term has been extended. Google has set the minimum term to 61 days but in reality, only a minimum 90 day or 3 month payday loan will pass Google Adwords approval. 

This is the first time Google has announced a worldwide ban on ads relating to a broad category of financial products. Google’s move can be traced back to mounting pressure since 2015 from consumer protection and privacy groups as well as the coalition of civil liberties. Civil right groups such as the Leadership Conference on Civil & Human Rights have been very vocal about how payday loans exploit low-income individuals with aggressive but misleading campaigns. Many people believe this influenced the search engine giant to announce a total ban joining another tech giant, Facebook, which stopped displaying payday loan ads in 2015.

Implementation implications 

The move was, and is still, expected to undercut payday loan business whose clients originate mostly from the internet. It is, however, important to note that payday loan borrowers will still be able to find payday loan lenders via Google search which defies the reasoning behind banning payday loan ads in the first place.

To enforce this policy, individuals and companies wishing to market payday loans via Google ads will be forced to disclose crucial details about the loans in question i.e. the length/term of the loan as well as the yearly interest rate before being allowed to run ads. In addition, other lenders charging over 35% interest rate in the U.S. won’t be able to display ads going forward. The same applies to websites which connect such lenders and distressed borrowers.

Execution of the ban

Although Google announced the ban would be effective starting July 13, payday loans which didn’t meet the new criteria were still showing many days after July 13. It is accurate to say the ban wasn’t well thought-of. Although Google posted an update on July 20 stating that the high-APR policy on personal loans affects U.S. advertisers only, the policy on short-term personal loans is, however, global including the UK. 

Also, Google is not accepting payday ads and ads for high-interest loans going forward. Existing ads that meet these criteria will be removed from the system in a few weeks. Google hasn’t however given a definite date this time round acknowledging that the process may take longer than anticipated due to the number of existing payday loan ads, as well as the manual loan term checks, the search engine giant will have to conduct before deciding whether to approve or disapprove ads. 

Implications to lenders

Payday loan lenders stand to be affected negatively by this update given the fact that most borrowers learn about payday loans and apply for them through online payday loan ads. The update has also made competition impossible since all lenders are subject to a predetermined minimum term and interest rate. All lenders will be forced to advertise the same products going forward.

Also, Google seems to be favoring established payday loan lenders since such lenders already have established organic search presence and Google isn’t touching organic search ranking with the new update. This is yet another case of established businesses getting unfair advantage.

In regards to policy violations, lenders who violate the new ad policies face ad disapproval, domain disabling and/or account suspension. Ads which don’t meet the new policy guidelines won’t run until they are fixed. Google may also suspend websites which violate the policies openly which simply means such websites won’t be able to run ads until the problem/s are fixed. In case of repeated or serious violations, advertisers face a permanent Google AdWords account ban/suspension

Implications to applicants

Although Google claims the new update is meant to protect its users from being exploited by payday loan lenders, the update has introduced new drawbacks especially in the UK where payday loans are already regulated effectively. For instance, applicants will now be forced to borrow more over longer terms/periods i.e. more than 3 months which will increase the cost of loans for individuals who usually take payday loans for short time periods i.e. two weeks. Take this example;

Borrowing £100 for two weeks at 0.8% per day = £100 + (11.2% x £100) = £111.2

Borrowing £100 for three months (90 days) at 0.8% per day = £100 + (72% x £100) = £172

Holding loans for a longer time period is clearly expensive.

Applicants also don’t have the power of choice when selecting payday loans going forward since all lenders have to offer the exact same products. Applicants can only rely on Google search which will be promoting established lenders only with a high search ranking.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Credit rating

Will Getting A Payday Loan Affect My Credit Rating?

Taking out a payday loan is an option for many people wanting to access cash quickly. Some might worry that taking out this type of loan could affect their credit rating in the future, but like any debt, providing that it is paid back in full and on time, there is typically no reason why a person’s credit rating would be compromised. In fact, taking out a payday loan and repaying on time and fully could even, in some situations, end up having a positive effect on someone’s credit score.

It should be noted that even though taking out a payday loan and complying fully
with the terms shouldn’t impact a credit rating, it may not be wise to take
one out if a person is intending on applying for a mortgage or other significant
borrowing method in the near future. Some lenders have shown that they look less
favourably on people with payday loans in their credit history, regardless of
whether they have paid them back or not.

Taking out a payday loan could signal to some lenders that someone has money
management issues and therefore applications for large amounts of cash over a
long period could be refused.

Proceeding with caution is probably the best advice. Some people might be
tempted to take out a payday loan as a way of boosting their credit rating but
this could be a gamble in the long term, particularly as credit reference
agencies now differentiate payday loans separately on credit files. This means
that serial payday loan borrowers can easily be identified by underwriters who
may decide the risk of lending is just too great based on previous payday loan
borrowing history.

On balance someone taking out a payday loan once and paying it back in full at
the agreed terms could be unlikely to suffer any damage to their rating.
However, those borrowing this way regularly could signal alarm bells with
lenders when it comes to making a big commitment like buying a house.

For those concerned about their credit rating it is possible to keep an eye on
how it looks by requesting the information from credit rating agencies. They may
charge a fee for doing this but it could be the best way of someone keeping a
close eye on their credit file. It is also worth remembering that applications
for credit whether successful or not are recorded so be mindful of making
numerous applications if the likelihood is they’ll be refused as this too
could be damaging.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

payday loans

The Birth & Evolution Of The UK Payday Loan Industry

Overview: Brief History

The Payday loan industry in the UK dates back to the early 90s. Initially, there were very few Payday loan lenders as the concept was fairly new and untested. Fast-forward two decades later to 2007-2008, which marked the onset of the global financial crisis, the industry was at its peak as it became extremely difficult for people to obtain credit facilities from mainstream financial institutions in the UK. Between the year 2006 and 2009, the number of people using Payday loans in the UK increased four times. 

Almost a decade after the recession, the Payday loan industry in the UK continues to enjoy tremendous growth. According to the FCA (Financial Conduct Authority), there are over 50,000 credit firms in the UK today offering Payday loan services. Approximately 200 of these firms are exclusively Payday lenders.

According to 2009 FCA statistics, 1.2 million people in the UK took out Payday loans amounting to 1.2 billion pounds. Approximately 4.1 million loans were taken out that year. Fast-forward three years later (2012), the size of the Payday loan industry had almost doubled in size to £2.2 billion.

Industry criticisms

This unprecedented growth came at a price. While the industry was at its peak, numerous complaints surfaced. Payday loan borrowers were increasingly complaining of various malpractices in the industry the most notable being the high interest rates, high late fees/charges and aggressive collection practices. These grievances caught the attention of the UK parliament in early 2010. 

The UK parliament pushed for investigations into the claims and suspect firms. Key legislation areas were identified the most notable revolving around the pricing of Payday loans, cloning of payday loan firms, flawed advertising practices and high late fees. The investigations revealed that the high charges among other malpractices were unwarranted given the fact that Payday loans don’t actually carry substantial risk as perceived by lenders in an effort to justify high fees and interest rate charges. In fact, Payday loans have been found to carry the same amount of lender risk as other forms of credit.

In 2014, several firms were reprimanded and directed to pay fines for illegal practices. Among them was Wonga.com which was reprimanded for unlawfully demanding payment on behalf of solicitors. Cash Genie was also reprimanded for imposing unlawful charges. 

Changes in UK law governing Payday loans

It wasn’t until April 2014 that the Payday loan industry in the UK got a major overhaul in all aspects from the way the loans are issued to the way they are repaid. The FCA set two main goals. One; to ensure all Payday loan lenders lend to borrowers who can afford the loans. Two; to ensure Payday loan borrowers were fully aware of the risks as well as cost implications of borrowing Payday loans or short term loans. Under this goal, the FCA also set out to ensure borrowers were aware of the correct cause of action in case they encountered financial difficulties meeting their repayment obligations. 

To achieve these goals;

· The FCA set an interest cap of 0.8% per day: You can’t pay more than 0.8% interest per day on your UK Payday loan. 

· The FCA has also fixed default fees at £15.

· The total cost cap has also been fixed at 100%: The entire cost of the loan can’t exceed the cost of the loan.

· The FCA has also put other stringent measures to drive up standards in the Payday loan industry in the UK. For instance, Payday loan firms will be subject to affordability tests going forward. Limits have also been set on rollovers and continuous payment authorities.

For the thousands of people who have struggled to repay Payday loans, these new laws have been a giant leap forward. They have restored sanity to an industry that had turned rogue.

Payday loan: Benefits to borrowers

Since UK Payday loan borrowers now enjoy a considerable amount of protection now more than ever before, there is absolutely no reason why they shouldn’t take advantage of the loans which come with great benefits such as;

1. Quick processing: You can get Payday loans or same day loans quickly (in less than an hour after application).

2. Great source of emergency cash: Payday loans are great sources of money for catering for emergencies such as car repairs and emergency medical bills when your payday is weeks away.

3. Few restrictions compared to other forms of financing: You just need a job to secure a Payday loan. 

4. No collateral: You don’t need an asset/collateral to secure a Payday loan

5. No credit checks: Payday loans lenders don’t do credit checks like other lenders before giving out loans. As a result, you can qualify for a Payday loan even if you have a poor credit score/rating. 

6. Fast and convenient application: Most, if not all, Payday loans lenders in the UK accept and process online loan applications 24/7. As a result, you can apply and get a Payday loan within minutes at the comfort of your home. Furthermore, the application process is easy. 

7. Favourable legislation: The UK Payday loan industry has favourable legislation that protects borrowers. With daily a 0.8% daily interest cap in place as well as a fixed total cost and default fees, borrowers are rest assured of protection. 

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

FCA

What effect has the FCA had on the Payday Loan Industry?

It has been a little over 18 months since the FCA introduced their ruling on the
payday loan industry. The ruling has meant that chargeable fees are capped on
any high cost short term loans. The cap of 0.8% per day with a default charge
cap set at £15 was welcomed by many as a means of regulating the otherwise
apparently rogue payday loan sector.

Also part of the new rules was the fact that a borrower can no longer be charged
more than double the original amount taken out.

In terms of a moral standpoint some would argue that the capping was long
overdue as the payday loan industry is responsible for getting those that
can’t afford it into huge amounts of debt. The industry itself was recorded as
being worth in the region of £2.5 billion across 1.6 million borrowers in 2013
ahead of the new capping. This means that the industry back then was worth an
awful lot and as such some might expect an unwillingness to change amongst
suppliers.

In actual fact what was seen ahead of the regulations coming into force was that
the main suppliers of payday loans already complying with the new caps by
bringing their prices in line with the requirements. The industry also witnessed
the more, what could now be described as, unscrupulous lenders shut down ahead
of any regulatory need to follow the new capping levels. What this presents is
that the industry was in fact ready to accept the required changes and be
complicit with them.

As early as June 2015, just 3 months into the new rulings the Citizens Advice
Bureau released figures which showed that complaints to them about payday loan
companies had almost halved based on the previous years’ figures. This
demonstrates that consumers too were more satisfied with the service and charges
provided by these short term loan companies.

The benefits of the FCA rulings on payday loans are two fold to consumers and
lenders alike. For lenders the volume of reckless lending organisations has
reduced narrowing the field in terms of competition. For consumers they now have
greater awareness of what payday lenders can and can’t do without their
express consent – for example access their bank account to deduct payments
automatically. It has also meant that more stringent checks are now made to
determine how affordable a payday loan is for a particular individual. With more
checks and lower costs all the signs point to payday loans becoming a legitimate
alternative rather than a slur on the financial services industry as a whole.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.

Google

Google ban on payday loan ads comes into play

Today the plans announced by Google back in May this year will come
into force. From 13 th July Google will ban all ads for 60 day payday loans in the
UK market. The decision to ban this type of advertising has left some
questioning the motives of Google and whether the change is a moral stance or
something else.

Money lending has always been met with a degree of scrutiny and there is no
doubt that there is a significant question mark over the affordability of some
payday loans. However, whilst some think that payday loans are harmful the
lenders themselves argue that they are lending responsibly and they make
specific checks to ensure people can afford the repayments. It is clear that
whilst people might struggle to pay back the loan if they don’t meet the terms
they are fully aware of what they are getting into when they take out such a
short term loan.

Google themselves state that it is indeed these terms that are the main reason
for the ban as their findings lead them to update their policies on ads for
these kind of products and ban them across the board.

Payday loan defenders state that there are other products that can still
advertise on Google that equal or very similar interest terms such as finance on
household products. It could be said that the payday loan market has been a
little hard done by but it could yet see the banning of further high interest
products and services.

To be clear the ban is not a total ban on this kind of advertising and providers
are likely to still bid for and rank for the term but just will need to work
harder and smarter to rank more organically. This is something that is likely to
benefit the bigger names in payday loans the most as their more recognisable
branding and name fairs better in a natural search.

The ban does represent a clear need for cleverer SEO for these kinds of
companies and fortunately for consumers it typically means that the more
regulated and established lending companies are likely to gain better
recognition online. Newer payday loan companies may struggle without the
benefits of PPC in the long run.

A long term SEO strategy could be what benefits any payday loan company affected
by the new ad rulings.

Is the Company Director of Swift Money Limited.
He oversees all day to day operations of the company and actively participates in providing information regarding the payday/short term loan industry.