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What are no credit check payday loans UK?
No credit check payday loans UK are ones that are offered without the lender first examining your track record in repaying previous credit commitments.
Payday loans are personal loans with short repayment terms, sometimes as little as one month. They can also be quick loans – lenders often claim to be able to have the funds in your bank account within minutes of your application being approved. Some companies operate exclusively online, others have physical shops.
A credit check is a comprehensive review of your track record – have you always paid on time in the past, or have you missed payments on loans, credit cards etc?
No credit check payday loans UK no longer permitted
You are much less likely to see a company offering you a no credit check payday loan than was the case a few years ago. No credit check loans UK are now illegal – all lenders must assess whether you are likely to be able to repay the loan before agreeing to lend.
The effects of FCA regulation on the payday loan sector
Prior to April 2014, payday loans in the UK were regulated to some extent by the Office of Fair Trading. However, from this date, regulation of payday loans and other forms of consumer credit passed to the Financial Conduct Authority (FCA).
The FCA introduced a much tougher regulatory regime, and this prompted many lenders to leave the industry. One of the changes introduced by the FCA was the need to carry out a much more rigorous credit and affordability check before agreeing to lend.
In the main, the companies that still offer payday loans are those who are committed to complying with the stricter FCA regime. If you come across a company claiming to find you no credit check payday loans UK, you should think very carefully about doing business with that company. Most of the companies who were not prepared to adapt to the stricter regime left the industry some years ago, but there may still be a few ‘bad apples’ around.
The FCA’s rules
As well as its rules regarding affordability assessments and credit checking, the FCA rules also cover areas such as:
- The information you should be provided with when you take out a loan
- What can and cannot appear in an advertisement
- How companies should deal with customers in arrears and those in financial difficulty in general
The FCA’s price cap
The FCA rules even dictate what lenders can charge borrowers.
Payday lenders cannot charge more than 0.8% interest per day. If you borrowed £200 for 60 days, then assuming you repaid the loan on time, the maximum interest you could pay would be £96. (0.8% multiplied by 60 is 48%, and 48% of £200 is £96).
The most any lender can charge as a default fee is £15.
No payday lender can ask you to pay more in interest, charges and fees than the amount of your loan. So, if your loan is for £300, then no matter how long it takes to repay the loan, you cannot be asked to pay back more than £600 (the original £300 plus an additional £300 in interest, fees and charges).
FCA regulation providing reassurance to consumers
In late July 2017, the FCA said that it believed its regulatory efforts had greatly improved customer outcomes in the short-term lending sector. It says that as a result of its effective supervision of the market:
- 760,000 borrowers are saving a total of £150 million per year
- Companies are now “much less likely to lend to customers who cannot afford to repay”
- Debt charities have seen a sharp drop in the numbers of people contacting them with concerns caused by these types of loans
Companies that fail to follow FCA rules can be fined, can be ordered to pay compensation to customers, and can even lose their authorisation altogether. The FCA can also impose fines and bans on senior managers of financial services companies.
The Financial Ombudsman Service complaints regime
Additional protection to consumers is provided by the Financial Ombudsman Service (FOS). If you are dissatisfied with the way you have been treated by your lender, credit broker or other financial company, you can submit a complaint to that company. If you are dissatisfied with the way the company handles your complaint – they may, for example, reject the complaint – then you can refer the matter to the FOS.
The FOS is independent of the FCA. The FOS will conduct an impartial investigation into the issues raised in your complaint. If it finds that the company has acted unfairly towards you, then it can instruct the company to pay you compensation. The compensation amount should be sufficient to put you back in the position you would have been in had the company treated you fairly in the first place. The FOS can also instruct companies to pay additional compensation if their actions caused you distress or serious inconvenience.
Any instruction from the FOS to a company to pay compensation is legally binding – the company has no choice but to pay up in these circumstances. Any company that fails to respond to a FOS instruction of this nature can expect to be stripped of their authorisation.
In summary, the regulatory environment in the UK, and the protection it affords to consumers should provide you with reassurance, in regards to no credit check payday loans UK. When you apply for a loan, you are in safe hands.