The long-awaited cap on the cost of payday loans was introduced by the FCA on the 2nd January 2015. From this date, the cost of loans was capped at 0.8% per day with default fees limited to £15 per loan. MYJAR was one of the first lenders to reduce its costs and introduced a new instalment loan product that allows customers to repay early to save money.
Before the price cap was introduced, the typical cost of a loan of £100 for 30 days would have worked out around £30. Some firms charged more and others added extra fees for things like funds transfer but there was a general clustering at or around the £30 mark. Now, under the new rules, nobody can pay more than 80 pence per day per £100 borrowed, so that’s £24 for a 30 day loan. In addition, the late charges have been capped at £15 where in the past these could have gone up to £50 or more.
Sounds like all good news for consumers? Well, for many yes, great news but some people who want loans are now finding that they are more difficult to get. Many short-term lenders have left the market. The High Street providers have already closed shops and this trend is expected to continue. The remaining lenders are having to be more selective and are turning more customers down.
So where are the people going who cannot now get loans where they used to? There are already worrying signs. Police in all parts of the country have warned that loan sharks are taking advantage of people desperate for cash. This lending is illegal and it comes with no guarantees that borrowers will be treated fairly – they almost certainly won’t be!
But it can be difficult to know what a loan shark looks like. They don’t have shops or websites. It could be a bloke down the pub, a friend of a friend or someone that comes to the house, apparently looking to help you out. All unauthorised lending is against the law.
The advice from MYJAR is:
Borrowing is never a good idea if you are already strapped for cash. If you find yourself struggling you should get help from a free debt advice provider such as Payplan. Remember, you can trust responsible lenders to help you if you are struggling to pay on time. Very often one call can be all it takes to help put your mind at rest and to get back in control.
Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk