Banks, Illegal money lenders, Admin fee charging brokering sites all big winners in Payday Loan clampdown.
An industry whistle blower has claimed that Banks are pressuring the Government to ban payday loans so that they can increase their profits. They also reveal how other groups are also big winners, some including rogue unlicensed websites.
As the banks stopped lending in 2008, private lenders filled the gap with alternative loan types like that of Payday Loans and Pawning. The damage has been immense to the banks, suddenly there was a sharp decline in the number of people who were failing to pay Direct Debits on time. If people couldn’t afford to cover an outgoing Direct Debit – they went and got a short term loan.
This was bad for the banks as they made a lot of money in fines and penalties when Direct Debits failed.
After 4-5 years of lobbying, the banks and others have finally killed off Payday Loans. This doesn’t mean that the public will be any better off. It means that the numbers of bounced Direct Debits are going up; this results in fines and income for the banks – happy banks = unhappy people.
What we (Quick Loans) didn’t realise when we first covered this story is that others are also rubbing their hands. Car Insurance companies, Credit Card companies etc are also going to be raking it in. They can also fine someone a late payment fee. They make a considerable margin on fining people.
What we now have is a double whammy to consumers who can’t pay a Direct Debit. They get fined once by the bank (up to £35) and again by the organisation who are claiming the Direct Debit (Usually about £15).
That is around £50 that the consumer has lost when they could have borrowed from a Payday Lender, paid as little as £20 in interest to cover the bill.
This is what financial experts never consider before they take to the air to condemn the industry. They will never answer why Payday Loans are bad when the alternative is a fine from the bank that is 2.5 times more than they would have been charged in interest.
The latest article from the BBC highlights other concerns which include Illegal Money Lenders being on the rise. The financial experts also don’t consider that going bankrupt isn’t an option when dealing with illegal money lenders – they want their money and they don’t stop until they get it.
What we have also noticed on this end is a big increase in the number of websites charging admin fees for brokering. As people become more and more desperate for a loan – they start doing silly things like paying websites admin fees.
Ending Payday Loans isn’t such a good idea when you know what is really going on. Better the Devil You Know.