Articles
Payday Loans
Finance watchdogs are about to tighten the rules on payday loans as the first stage of an investigation in to irresponsible lending comes to a close.
Payday loans are generally loans of less than £1,000 taken out to pay bills until the workers are paid again at the end of the month.
The industry has exploded from a fringe operation only a few years back to a huge high street and online industry as hundreds of lenders have moved in to the UK after US authorities restricted their activities or shut them down in several states.
The Office of Fair Trading announced payday loans one of their targets in their current review of irresponsible lending - and debt counselling organisations have been lining up to complain during a public consultation period that ends on October 24 (2008).
Payday loans are under attack from debt counselling organisations claiming the lenders charge interest rates as high as 2,000%.
As the credit crunch bites and people with poor credit histories find loans harder to come by, business has boomed for the payday lenders.
"The OFT is undertaking a project looking at what constitutes responsible lending under the Consumer Credit Act and how this affects companies' holdings of consumer credit licences.
"This project will examine several areas of consumer lending, including payday loans," said an OFT spokesmen.
A quick Google search throws up more than 500,000 results for 'payday loans' in the UK.
Typically, the lenders offer £300 available the same day without any credit checks providing the borrower:
- is aged over 18 years old
- has a full-time job
- takes home pay of more than £750 a month
- has a valid bank debit card
The interest payment is £25 per £100 borrowed or 1845% APR.
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