Loan sharks on the up after payday loan controls
The Consumer Finance Association said that these new rules are the reason that there's been a 70% reduction for those wanting to access short-term credit. When the Financial Conduct Authority started to play hardball with payday lenders, people wanting cash started to look elsewhere.
And while, according to Citizens Advice, the number of complaints and problems about payday loans have halved on the previous year, the CFA 'Credit 2.0' report says that people have gone to nastier lenders.
CFA chief executive Russell Hamblin-Boone said of their findings: "Credit 2.0 takes a fresh look at alternative forms of credit, including short-term loans, and shows that turning off the credit tap has had no impact on demand or debt levels. It is an attempt to educate all those who continue to call for further restrictions on lenders without considering the consequences for millions of families."
"Our analysis of hundreds of thousands of loan applications proves that borrowers are being excluded from credit and concerns are growing for how they are filling the gap in their finances. It's time to draw a line under the attacks on short-term lenders, recognise the huge improvements in lending and accept that we have a highly-regulated, legitimate market to keep people out of the hands of unscrupulous, illegal lenders."
"The report shows the scale of the challenge for the regulator in finding the right balance between consumer protection and maintaining a competitive alternative credit market."
What exactly is the scale of the challenge? Well, the report reckons that 39% of payday loan customers don't have any other access to obtaining credit. The report adds that credit unions are not a viable option for many, and that trad. arr. lending services are outdated, being usurped by new technology.
Hamblin-Boone added: "The economy is growing again, but the financial landscape has changed forever. Technology is changing the way we live and our 'instant society' demands quick decisions, simple products and convenient ways to borrow small sums for short periods of time. Critics of innovation that refuse to embrace the change by trying to hold back the tide could find themselves swept away by modern life."