Paying The Price For Unfair Lending
Back in October 2015, agreements were made with the financial regulator in the UK to refund customers that had been wrongly lent money. However, according to owners of The Money Shop, Dollar Financial UK, only 25% of the agreed refunds have been paid out to date.
The refunds were largely for people who were given loans that they could not realistically pay back. The remaining 75% of refunds, which come to a total of over £7 million will not be issued and completed until June of this year.
Time For Change
As a result of the issues and negative press surrounding payday lending following the revelations of the regulators, companies such as The Money Shop are making big changes to improve. The Money Shop in particular, which is just a part of a group of US owned companies started by launching a new branch in Derby and making major changes to some of its existing branches across the UK.
They and many other companies have seen the number of payday loans plummet as a result of the new and more rigid payday lending rules set out by the Financial Conduct Authority (FCA). Not surprisingly, it has been a tough time for lenders with The Money Shop closing well over half of its branches in the last 18 months.
Due to a seemingly overnight change to the payday loan lenders policies and rules, they have had to rethink the way they do business. Lenders have had to diversify from focussing on solely short-term, high-interest lending to longer term arrangements as well as other services such as transfers and international money exchange.
A New Era For Payday Loans
Lenders have not fought the changes but instead, many have actively sought to prove they discourage the careless and ill thought out lending of the past. Some companies have overhauled the way they advertise loans as well as how they are managed to try and make a change.
The agreed refunds act as ‘a line in the sand’ according to Dollar Financial Executive Stuart Howard and signal a new way of lending. They aren’t the only company* to be stung by regulation changes; Wonga payday loans wrote off over £200 million in debt affecting 330,000 borrowers whilst Cash Genie were forced to pay £20 million for charging borrowers to transfer them to switch to their own debt collection company.
With the new regulations firmly in place, the lending market is a much fairer and safer place for those in need of a short term payday loan.