Short Term Loans – Perceptions in the UK 2017

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What is the general perception of the Payday Loans Industry in the UK at the moment? Good, bad?

Let’s ponder this subjective topic for a moment and discuss the merits of this sector of the Unsecured Loan Market.

Loans in the form of advances of income lent by Employer’s, Official and Unofficial Lending Institutions, Friends and Family have existed for centuries; the concept is therefore not new and commonplace in every Society at some level. We believe it will always exist as it fills a valuable niche for very many people.

Let’s deal with The Bad

The problem occurs when Financial matters are abused; ‘Loan Sharking’ is the extreme worst case example of how small lending can go wrong and is practiced by Unofficial unlicensed Lenders – usually by individuals rather than by legitimate Organisations / Companies.

To a lesser extent but still not desirable, is unregulated Lending by Official Licensed Lenders. It was this practice whereby the Lenders decided upon their own Annual Representative APR’s, Late Repayment Fee’s, Debt Collection methods and ‘Rollovers’ (the rolling of an existing loan to another month where the Capital remains unpaid and interest only is paid on all months until the entire debt is repaid).

Obviously, with varying successes, competition costs, desired profit-margins and other factors, this escalated to a point whereby the costs to Borrowers reached unsustainable levels and was severely harming the perception of the Payday Loan industry to the point where the lines between ‘Loan Sharking’ and Licensed Lenders became somewhat blurred.

What happened next?

The Solution

Before 2014/15, Consumer Credit Licenses were granted by The Office of Fair Trading however whilst they encouraged good practices, the Lenders were ultimately responsible for self-regulation to a great extent.

In this regard, the Lenders came together under their Trade Associations such as the CCTA and BCCA to create the Good Customer Practice Charter in 2012 whereby all Lenders who were signatories, agreed to put the best interests of the Borrower at the heart of their decision processes and ensure Fair and transparent processes.

The Charter was a big step in the right direction and ensured better communication in principle between Lender and Borrower so that the Contracts they entered into was understood.

It didn’t seek to control the Representative APR’s or the amount of times a debt could be ‘rolled over’ or the use of the Continuous Payment Authority (the method of recovering debt by allowing the Lender to automatically take what is due to them on the agreed Contract Date).

Enter the Financial Conduct Authority.

The FCA was founded in 2013 and took on board regulation of the High-Cost Short-Term Credit (HCSTC) sector. Following extensive investigation, they decided upon the following:

Borrowers will never

  • Pay more than 0.8% per day in interest
  • Pay more than £24 per £100 borrowed
  • Pay more than double the amount that they borrowed

The impact of this was immediate with many Lenders unable to continue and therefore leaving the Market.

However, the aim of the FCA to realise a properly-regulated Consumer Credit Market within the HCSTC sector was successful.

The further introduction of the compulsory Treat Customers Fairly Policy and inclusion of Monthly Expenses into Application Forms shifted the Market from one of ‘make your own rules’ to one that could be trusted and used in its best form by Consumers.

More recently, the Competition Markets Authority have demanded that all Lenders have their details shown on a Price Comparison Website. The distinct advantages being to provide the Borrower with an easy ability to research the best value loan for their needs.

Finally, The Good – Can Perceptions Change?

In light of the Solutions to The Bad as outlined above, the Payday Loan sector has largely cleaned up its act. Lenders that took advantage of Borrowers during unregulated times were fined heavily by the FCA in a remedial action aimed at bringing Order to the once badly-perceived industry.

Now, Borrowers can easily seek out Regulated, Licensed Lenders who are Members of a Trade Association that follow their Good Customer Practice Charter and who are featured on a Price Comparison Website – such as – and rest assured that they are protected from the unfair practices of the past.

So, what is the perception of the Payday Loans Industry in 2017? We think it has much improved and that the general perception is changing from negative to positive; a good sign that the niche market Regulated Lenders fulfil can remain and provide a valuable service.