Published On: Mon, Jun 1st, 2015

Are we seeing the beginning of the end for Payday Lenders?

With the recent poor financial performance of some market leading payday lenders experts are predicting that only a handful could remain in operation as more and more lenders decide not to renew their credit licenses and pull out of the market place.

Currently there are over 400 payday lenders operating in the UK. However with tough new rules being introduced by the FCA some financial experts are forecasting that the majority of these will not survive. In fact the predictions are so radical that only 3 or 4 are predicted to remain in operation.

The new FCA regulations introduced in 2014 include a daily interest rate cap of 0.8% of the amount borrowed, fixed default fees capped at £15 and a total cost cap of 100% meaning that fees and interest must not exceed the amount borrowed. With some firms charging as high as 6000% APR and leaving many borrowers with huge debts these new regulations are much needed. Martin Wheatley the FCA’s CEO says ‘I am confident that the new rules strike the right balance for firms and consumers. If the price cap was any lower, then we risk not having a viable market, any higher and there would not be adequate protection for borrowers.

photo 401(K) 2012 via Flickr

photo 401(K) 2012 via Flickr

So where does this leave lenders?

Whilst many lenders are predicted to not survive these regulations it has not stopped other lenders from entering the marketplace. In fact payday loan lenders Wizzcash are managing to keep both feet firmly planted in the market under these new rules. Their interest rates are at the lower end of the scale in fact borrowing £300 and repaying over 3 months will attract interest of £137 and the first loan that a borrower takes is limited to between £200 and £300.

Whilst there is a demand for this service there will still be a place for a service who meets the needs of its customers. At least with a strict new regime in place the consumer has increased protection and is limited to the amount of debt that they can accrue.

How have others been affected?

The Money Shop which is the second largest payday lending firm after Wonga are reported to be shutting down 240 shops by the end of June leaving its total number of remaining shops at less than 300. In fact with the latest round of closures the total number of payday loan shops in the UK has reduced from 1,400 in 2013 to 500. This would indicate that the new regulations are having an impact and that the industry is cleaning up its act.

Included in those lenders who have decided not to renew their credit licenses are the Cheque Centre, Cash & Cheque Express, Cash Genie and Speedy Dosh. Whilst these lenders have decided to close the rest of the industry is forced to clean up its act which can only be a good thing for the people who continue to use the service.


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About the Author

- Adam Lee is a financial writer who has insightful knowledge in dealing with different financial issues. He tries to help people to get out of difficult financial situations by contributing financial write ups to websites and blogs such as Moneyforlunch.com and Moneynewsnow.com


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