The Government has set out its intention to look at capping the cost of short term credit.
Once again, this has meant payday lending is making headlines.
At MYJAR, we have always aimed to give our customers a fair, simple service. And we’ve always said that tighter regulation can be part of the answer to bringing those lenders who don’t treat their customers fairly into line.
So we’ll be working closely with the Government and the Financial Conduct Authority, to help them get their regulation right.
However, there are a couple of reasons why we’re worried that capping the cost of credit could be a bad plan.
Firstly, a cap might make things more complicated for customers with some charges being hidden away in the small print or the deal becoming more difficult to understand.
We make sure that our charges are clear. We carry out credit checks and lend to people that we believe can repay on time. If customers do not repay on time, the additional charges are clear and simply explained.
Secondly, a cap will mean that some short term lenders will leave the market, leaving less choice for borrowers. Lenders may tighten the credit policies that decide who they lend to, as they’ll have to be even more confident they’re going to get paid on time. This means that some people, who are perfectly able to pay back their loans, could be denied access to credit.
In the US, when Georgia and North Carolina went as far as banning payday lending in 2004, borrowers instead went to less scrupulous lenders, and the result was higher charges, more complaints about lenders and more people getting into financial difficulties.
We do believe that more needs to be done to force bad lenders out of the market to protect customers and if regulation helps keep things simple and fair for customers, we welcome it.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk