After an enquiry from the Financial Conduct Authority (FCA), accusations of unfair and predatory lending to customers are emerging.
For quite some time these companies that offershort term loans at extreme interest rates and extreme payback terms have been operating on the very edges of financial legality. Very often there are insufficient credit checks or income reports. Customers can borrow fairly large sums of money in less than 10 minutes. Very often these borrowers probably will not be able to pay back the interest rates on these quick loans and end up in severe financial difficulty and can end up ruining good portions of their lives all because of borderline illegal practices.
The FCA reviewed many ‘payday lenders’ and assessed that although some had improved some of their practices, many were still not carrying out sufficient credit checks and were not taking due concern over who they were lending to and the likelihood of them paying it back.
The FCA has issued something of an ultimatum to these companies. They have said they have assessed, monitored and reviewed their practices and have set new guidelines. If the companies do not bring their lending practices in line with the new regulations, they will face very quick and real reprisals. Lots of these companies also carry out ‘bailiff’ type practices that they are neither licensed nor legally allowed to carry out. In the UK there are very prescribed sets of circumstances that allow repossessing of property or goods. Several of the lending companies were accused of pretending to be licensed bailiffs in order to retrieve some of the debt owed to them.
Some of the firms assessed had improved their processes, and the FCA did say that some of these businesses carry out a useful service that can have a good place in financial society, so long as they maintained their fair practices.