Ordinary day loans in the United Kingdom usually borrow up to £ 500 for paid in the short term, or up to "payday". In the absence of interest rate restrictions, the average annual percentage rate (APR) for payday loans can reach 1,000% APR or more. Ordinary payday loans in the UK cost around £ 25 for every £ 100 borrowed per month.
The industry of payroll loans in the UK has grown rapidly, with four times as many people using the loan in 2009 as compared to 2006. In 2009 1.2 million people took 4.1 million loans, with total loans of Ã, Â £ 1, 2 billion. The average loan size is between Ã, Â £ 265 and Ã, Â £ 270, and two thirds of borrowers have annual revenues under Ã, Â £ 25,000. In 2009, the payday loan industry generated revenues of around £ 242 million - accounting for about 20 percent of total loans.
The UK's largest lender is Wonga, which in 2014 is estimated to have a market share of between 30% and 40%. The second largest lender is Dollar Financial Group, which operates the Money Shop network, as well as online lending platforms, Payday Express, Payday UK, and Ladder Loans. Dollar Financial acquired PayDay UK in 2011, then the largest online lender in the UK.
Video Payday loans in the United Kingdom
Overview
Salary loans come from the United States and have grown rapidly in the UK market over the last five years. They offer relatively small capital (usually up to Ã, Â £ 500) for the short term, often under two weeks on average (or up to "payday").
The number of people who took payday loans in the UK in recent years has increased fourfold, to 1.2 million in 2009. Borrowers take around 4.1 million loans of £ 1.2bn in the form of money lent. Borrower payday loans take an average of six loans per year and the average size of a salary loan in 2009 is estimated at 294 pounds  £ 294. Of the borrowers have income under Ã,  £ 25,000.
A typical payday loan in Britain costs £ 25 for every £ 100 borrowed per month, which means a loan of £ 300 will cost £ 375 to pay back after one month. The UK does not impose legal limits on revolving loans, and there are no restrictions on the interest rates that a payday loan company can pay: a UK paying lender charges a typical "typical APR" of 1.355%, the other lenders advertise an APR of 2,225%. Most companies charge 25% for prepayment at the end of the month, some 30% fee, which is equivalent to APR of more than 2000%. Failure to pay a payday loan leads to an APR spiral. According to Consumer Focus, "the cost of getting an online loan (often Ã, £ 25-Ã, Â £ 30 [per month] per Ã, Â £ 100) exceeds the cost of getting a loan on High Street (often Ã, Â £ 13- $ 18 per Ã, Â £ 100) "because lenders refuse fewer applicants and face higher levels of fraud and default. Providers charge a fee for a loan that is normally expressed as a fixed fee of Ã, Â £ 100 borrowed for the stated short term, usually around Ã, Â £ 25.
Maps Payday loans in the United Kingdom
Rule
Under the Consumer Credit Act 1974 the lender must have a license from the UK Office of Fair Trading (OFT) to offer consumer credit. The 2006 Consumer Credit Act explicitly requires the OFT to consider irresponsible lending in evaluating whether the lender is eligible to hold the license. Currently there is no limit on the interest rates on corporate loan payrolls may charge or on rolling loans, but the government is waiting for a new law to limit the cost of such loans. Payday loan ads are subject to the Consumer Credit Rules (Advertising) 2004. This means that "regular APR" must be stated in ads that meet certain criteria, such as ads that indicate that credit will be given to customers who may find access to credit restrictions. Ads are governed by the Advertising Standards Authority (ASA), and there are some ASA cases that enforce complaints against advertising by payday lenders.
In June 2010, OFT issued a "high cost credit review." In this report they conclude that changes can be made to the industry itself, but that "a more radical approach would be needed if the Government or others want to address the broader social, economic and financial context in which high-cost credit markets exist."
To get a good idea of ​​the size and range of payday loan companies operating in the UK, comparison sites are a useful tool, as recommended in OFT reports - "We recommend that the Government cooperate with industry groups to provide information about the high cost of credit loans to consumers through a price comparison website. If this can not be done on a voluntary basis, the Government should consider instances to introduce legislation to create a single website that allows consumers to compare features of home loans, payday loans and pawnshops with credit unions and other lenders in their local area. "
In March 2013, OFT issued a long-awaited update regarding the industry. That's very important, giving 50 leading lenders only 60 days to address the issues raised or at risk of losing their license. In particular, he calls "the failure to find out whether people are able to repay loans, aggressive debt collection practices, failure to explain how repayments are collected, and lack of sufficient patience for those who can not afford repayments." It's called the market to the Competition Commission for "the deep-rooted problem in how payday loan companies compete"
With the newly formed institution, the Financial Behavior Authority, due to take over the industry regulation of OJK by 2014, the government expects greater control and power over rogue lenders. Industry criticism, including which? and charity debt, welcome development. Russell Hamblin-Boone of the Consumer Finance Association, a trade body representing 70 percent of the payroll loan market, dismissed criticism. He said the OFT report was based on findings in the summer of 2012, when they visited the company in question, and in the months between research and publication of their findings, the industry has done a lot to improve its practice. He expects all of his members to meet the OFT within 60 days and retain their license, and he further claims that he does not believe that the whole market is set to benefit from the delinquent.
Google states that starting July 13, 2016, payday loan ads are no longer possible. The new ad retrieval policy also includes advertisements for loans with an annual percentage with APR of 36% or higher and prohibits ads where repayments within 60 days from the date of issuance. However, by December 2016 this policy was not enforced. Furthermore, a special search query with the term 'payday loan' (or similar terms) still shows the option for a payday loan.
Broker
As payday loan companies can achieve huge profits from these loans, they use large broker networks to generate business. These are sometimes called borrower services, and may include broker fees, which are often paid upfront; meaning that the applicant must pay a fee just to apply for the advertised loan, in addition to high interest. OFT has urged the government to tighten restrictions on payday loans. Now there are brokers that help applicants avoid paying extra fees when applying for a salary loan in the UK.
Criticism
There is a lot of criticism of the short-term loan market in the UK. Vince Cable MP said in 2008 that "the growing popularity of this type of short-term loan highlights issues stemming from the credit crisis and unsustainable personal debt levels in the UK." Chris Tapp from the Credit Action charity said in mid-2008: "Over the past year, payday loans have been a problem in the UK, and the growth of people who have such loans and have problems have been well known in the past six months."
Credit Action makes a complaint to the OFT that the paying lender is placing an advertisement on the Facebook social networking website that violates advertising regulations. The main complaint is that the APR is not displayed at all or is not shown quite clearly, which is clearly required by the UK advertising standards.
In 2010 a campaign organized by the Kompas pressure group to "end loan sharks" and impose interest rate restrictions on the "high-cost credit sector" saw more than 100 MPs sign the First Day Movement in September 2010, and more than 200 in April 2011. Other movements on the subject have been made in previous years, and groups like Debt at our previous doorstep have highlighted this issue.
Writer Carl Packman has criticized industry regulations. Packman said: "Given the current regulatory landscape, we have to trust [lenders] in their words that they follow a self-defeating business model... Indeed payday lenders break their promise of responsible lending as long as time."
The highly criticized paymaker Wonga.com is one of the largest financial companies in the UK. Wonga has faced widespread criticism of interest rates, allegedly heavy debt collection methods and sponsorship deal worth a £ 24 million shirt with Newcastle United football club that some say will tempt young fans who are easily influenced to owe. Another concern over the evidence has allowed children to borrow cash. Although people under 18 are prohibited from lending money to companies, young people are looking for ways to convince Wonga's "decision-making and risk-automated risk system" that they are eligible for an APR loan of 4,214 percent. In 2012 the company became the target of identity thieves, with hundreds of individual UK cases being pursued by companies for loan repayments they never submitted.
In 2013, cash payment brokers, Cash Lady, were heavily criticized for an advertising campaign featuring Kerry Katona. Following a complaint to ASA in May 2013, Cash Lady's ads were re-edited to remove the phrase 'Fast Cash for Fast Lives'. ASA believes this implies that payday loans will help finance the high celebrity lifestyle. In July 2013, Katona declared bankruptcy a second time, and was dropped by Cash Lady. One month later the ASA decided that Cash Lady could no longer use Katona in advertising, because she was too much in touch with people's minds with debt.
In January 2014, 247Moneybox along with other payday lenders were accused by which consumer group? using the "excessive" default cost to cut their key interest rate. That? It was found that "Ten of the top 17 payroll lenders we saw had a standard fee of Ã, Â £ 20 or more, and four charged Ã, £ 25 and above". Since January 2015, the FCA has covered default charges that can be charged for missed payments of up to £ 15 and that the total amount of borrowers must pay can not exceed 100% of the amount borrowed, including all fees and interest.
References
Source of the article : Wikipedia
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