When questioned about the reason for this significant drop, the researchers referred to the new rules that were introduced by the regulator of the FCA or the Financial Conduct Authority. It was in April, 2014 that the FCA stiffened the regulations and introduced a cap on the charges of payday loans in January, 2015.
Between January, 2014 and March, 2014, when the changes weren’t introduced, an eminent company Citizens Advice said that they received around 11,155 complaints about the malpractices practiced by the payday loan lenders throughout the nation. However, to add to your surprise, in the same period, about a year later (in 2015), the number of complaints against the payday loan lenders fell to 5,554, which was a staggering drop of about 56%.
The Chief Executive of Citizens Advice, Gillian Guy happily reported that this drop in the total number of issues about payday loans is indeed good news for the consumers. It manifests the impact of strong stand against the untrustworthy lenders.
The Financial Watchdog Is Gripping Down On the Payday Loan Industry
As per the Financial Conduct Authority or the FCA, the nation’s financial watchdog is gripping down on the payday lenders with some new laws and rules to safeguard the interests of the borrowers. With the new rules coming into effect, borrowers will never ever be pushed to repay double the amount of the original loan.
The interest rates on these loans will be capped at 0.88% per day, thereby reducing the cost for majority of the borrowers and the total cost of the cash advance loan will be restrained up to 100% of the original principal amount of the loan. The default fees will also be capped at £15 and all these aforementioned changes are being implemented to safeguard the people who are in dire financial straits and are struggling to repay their short term loan debts.
Similar changes to the payday loan lending institutions were brought about in countries like Australia too where the payday lenders in Australia were forced to set caps on the charges and interest rates. Payday loan in Australia is yet another popular form of loan among the people who usually suffer from mid-month financial contingencies and the popularity of these loans had lead to severe discrepancies. Therefore, such changes to the interest rates were brought forward to protect the consumers.
No matter what is being said about the payday loan industry and the lenders, it is universally acknowledged by both high-income and low-income borrowers that during a time of financial problem, payday loans come as a boon. Although there are some lenders who have taken undue advantage of the borrowers and earned an infamous reputation for the entire industry, this is sure to be erased in the near future. Even the payday loan industry in Australia will flourish in the years to come.