Am I responsible for my payday loan debt? Who can I blame when I can’t pay my debt?

Who is responsible for my payday loan debt? Am I responsible? This is a common and controversial question often asked in the credit sector in the UK. For over ten years, the payday lenders have been in the firing line and have wrestled with the Financial Credit Authority (FCA) and the Ombudsman. The members of the public who have over-borrowed have appealed to the ombudsman and FCA because they are unable to pay back loans and the rolling over of interest becomes impossibly high.

Politicians have joined the fray and the Church is now in the mix. Payday lenders have to contend with a tarnished reputation and a few payday lenders have been in the spotlight for shady business practices.  Some unfortunate people have taken out multiple loans in an effort to pay off one loan with another loan and there is general sympathy for them. But, let us cut through the hype:

You and you alone, are responsible for your payday loan debt!

You should not have taken out the payday loan if you could not pay it back.  Payday lenders are now required to thoroughly check your credit rating before they lend you any money. Payday lenders must also cross-check with other payday lenders to make sure you don’t have loans piling up all over the country. Even if you apply online you will be checked before you are approved for a loan. If, after all the checking, you are approved for a payday loan that you cannot afford, there is only one person responsible and that is you.

It is impossible to payday lenders to get it right every time. Often, when people are applying for loans they are desperate and may hide the truth.

Payday loan scams

Unfortunately, if you get caught in the net of a payday scam by dealing with lenders who are not legitimate registered lenders you have only yourself to blame. Mainstream legitimate lenders offer upstanding products. It is incumbent upon you to do your own checking. Make sure the lender you propose borrowing from is registered and if necessary check with the FCA to ensure the company is legitimate. For those of you who do not have a payday coming up, don’t borrow money since you will probably not be able to pay it back.

Payday lenders offer short-term unsecured loans on the understanding that they will be paid back on your next payday. They are genuine lenders willing to loan you money in your time of need but they are not your family or friends, they are in business and they must be paid back on time. Before taking out a loan make sure that you are able to repay the loan and that you are dealing with a registered lender.

Relying on debt: unsecured personal debts

Towards the end of last year, UK citizens reportedly ran up the highest amount of debt since 2007. In November, heading towards the festive season, a collective 1.25 billion pounds was borrowed. The amount of 1.25 billion pounds was apparently mostly unsecured personal debts. The debts were in the form of payday loans, short-term high-interest loans, credit cards, credit cards and store cards. Nationaldebtline and StepChange are worried about the way people are relying so heavily on credit. These charities expect that, with the trend of borrowing so heavily, they will have more and more people knocking at their doors asking for help on how to manage their overwhelming debts.

Now, in 2015 credit is much easier to obtain that it was in the leaners years of 2009 and 2010 when financial institutions were very tight-fisted. Credit providers are actively trying to sign people up for their credit. The trade body for people working in the insolvency sector, R3, has completed research showing that one-fourth of British adults had plans to take out credit to help pay for their overspending over the 2014 festive season. 50 percent of those had hopes of using their credit card and 24 percent were planning to appeal to their bank for an overdraft. 14 percent were planning to finance their festive spending with store cards. Payday loans and new credit cards were other ways of paying off debts.

Banks are coming out of hibernation once again and they are desperately trying to sign up new customers. Banks are focusing on getting customers to move their debt from other banks and in order to achieve this they often have to take on the customer as well as his existing debt. Not only are banks taking on customers with existing debt but they are offering these same customers increasingly long interest-free loan periods in order to win the customer over. Lloyds Bank and Halifax have recently launched a marketing campaign offering zero interest over a 34 month period to clients switching to them. Barclaycard had beaten them by already offering zero percent for 35 months.

Back in fashion are personal loans when a mere six years ago it was almost impossible to secure a personal loan from any bank. It is possible to find a bank willing to offer you a loan for a mere 3.9 percent as opposed to the 7 percent of just over two years ago.

Tough times come and go but when times look as if they are improving it is prudent to put a little away rather than over-spending on luxuries during the festive season!

Payday in America – an overview of how payday works in the USA compared with the UK

Payday in America is much the same in the United States as it is in the UK, with one exception. The country is made up of autonomous states that govern themselves and have different laws for different things. With the advent of regulation in the UK in January this year, it is interesting to look around at the rest of the world and see how they are regulation this controversial industry. With 51 states and each having a different approach to regulation the small loans, short-term credit, it is interesting to examine how many states have regulated their payday lenders with the same rules that the Financial Conduct Authority finally settled on after a 20 month inquiry.

Payday in America – Different strokes for different folks

Upon researching payday in America there are many states that match some of the regulations in the UK. In Britain, payday lenders must now check those applying for a loan against a country-wide database to ascertain the credit rating as well as the number of loans that the person has taken out. There are several states that do the same thing and have implemented state-wide databases to ascertain if a person has more than one loan. The states that require this credit checking system are Illinois, Florida, Michigan, Indiana, North Dakota, Oklahoma, New Mexico, South Carolina and Virginia. What’s more Virginia and Washington limit the number of loans that customers may take out in one year which is something that has not been implemented in the UK. However, what both some states and Britain have in common is a cap on the rollover of the loan.

Most of these states also require that a lender extend the loan as well as lowering the interest rate on the loan as soon as it becomes apparent that the client is having trouble paying the loan off. This gives the client a better chance to get back on their feet and out of debt.

Since 2008, the District of Columbia capped the interest rate on payday loans at 24%. This interest rate is the same as banks and credit union and lenders must obtain a licence to operate.

In Georgia, payday lending was made a felony and could be hauled in on charges of racketeering.

New Mexico allows payday lenders but only under complicated circumstances. Rollovers are not permitted, fees and interest are removed from those that cannot pay back their debt, fees are capped, there is an enforced period of time between taking out a loan, a person’s total loans must be less than 25 of that person’s income.

North Carolina is busy with the process of weaning its population off of the credit system and then prohibiting it.

Finally, Arizona has capped the interest rate at 36% APR.

It is noticeable that many states put a lot of thought into regulating their payday lenders, which like the advent of the new laws in the UK can only be a healthy thing for an industry desperately searching to rub the tarnish off of its reputation.