The payday loans industry. What’s been happening recently?
There’s been a lot of news coverage about the payday loans industry over the past year. Much of this has revolved around changes introduced by the Financial Conduct Authority (FCA). These are designed to make the industry a fairer place.
This is welcomed by consumers and industry insiders alike. Furthermore there are fears the market is stagnating. The concern is the risk of a less competitive environment for borrowing short-term credit.
As of January 2nd this year, tough new rules came into play. By curbing interest rates applied to payday loans and capping penalty fees. As a result, generally reducing the cost of borrowing. This has an obvious immediate benefit for those looking to get this kind of finance. Yet it has brought the market to something of a standstill.
Many payday lenders have now departed the payday loans industry. As a result of the changes, many of those lenders based on the high street have had to close down shops. Last year, the number of shops run by major payday lenders dropped from 1,400 to less than 500. Proving to be a significant reduction.
Payday loans industry compliance is key!
For those who remain within the market, there is a general feel of disruption as a result of the new rules. Compliance has become key to everything lenders do. This has led to a new and much more cautious approach from many. As a result widespread changes to procedures have been disruptive to the ongoing running of businesses.
Stricter affordability checks and sharing information through credit reference agencies have affected internal efficiency. Yet this is something that was already struggling as a result of trying to meet the new compliance rules. The effect of all this is that the UK payday loans industry is in a period of realignment.
So change and reshaping into a new breed of products and systems will help support the new regulation.
There’s some confusion and fear around the payday loans industry, yet it’s not in peril. Working within these stricter guidelines could prove to be far more beneficial. Not only will it cover the lender’s backs but also lookout more for the customer as well.