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.

What is a payday loan? Be informed before you agree to a loan that you cannot afford

When it comes to payday loans, Payday lenders have faced criticism and bad publicity for the services that they provide to the public. Payday lenders have been blamed for cheating the public, promulgating poverty and stealing from the poor. These allegations may be all well and good, but the consumer who takes out a payday loan needs to be responsible for their actions and therefore here is as a guide: What is a payday loan?
• A payday loan is a short-term high-interest loan. That means that if you take out a payday loan it is important to understand that you need to be sure that you can pay this loan back in a very short period of time.
• A payday loan is designed to be exactly what the name suggests. A loan that you take out now and pay back when you receive your next wage packet. These loans are ideal for people who have an income and need to get their hands on some quick cash that they can pay back in a few weeks.
• Because the payday lender takes a huge risk when they are lending money to you so quickly and for such a short period, the lender usually charges an extremely high rate of interest. Commonly they can charge up to 1500% APR, compared to the 18% percent for the average credit card. New rules limit payday lenders from charging more than 0.8% interest a day. It is still very expensive because if you were to borrow 100 pounds for 30 days, the interest alone would be 24 pounds. That does not include any other charges or fees.
• Your debt can be rolled over twice. This means that you can push repayment over another month if you cannot repay. Even legislation requires payday lenders to provide you with information about debt help services; you will still incur charges and more interest for the additional two months of roll over.
• Payday lenders can also set up a CPA (continuous payment authority) so that they can withdraw money straight from your bank account. You have the right to stop this, and the lenders only have the right to two failed attempts before they have to contact you.

What is a payday loan? Avoid the trap of falling into debt

Many people rush off to the payday lender because it is an easy way to get their hands on some quick cash. Although the FCA has put some strict regulations into place, if you don’t have a bad credit record or other payday loans you are most likely to be approved. Payday lenders do cross reference to check if you have other loans and don’t be deceived; they are required to do a credit check. So what is a payday loan? It is definitely not a quick fix. Do not take out a payday loan if:
• You need cash to pay off other loans or debts
• You have other payday loans
• You are not absolutely sure that you can pay it back
• If you want to buy things, you otherwise can’t afford even with your pay packet.

That is what a payday loan is. A loan t tide you over until you get the money you are expecting to receive elsewhere so you can pay the loan back.

How to avoid Payday phone scams – Part 2

Payday loan phone scams, part 1

Unfortunately, after 10 years of fighting for their rights to trade honestly and respectably, the payday industry now faces a new threat to their reputation. Payday phone call scams have become an increasing menace to the unsuspecting public. So much, so that these scammers can convince a person who has never taken out a payday loan that he or she is in arrears and must pay up immediately. These scams usually come in the form of phone calls and victims are harassed, intimidated, and bullied into coughing up the cash that the caller is asking for. Often the victim is targeted and caught unawares. The person on the other end of the line will claim to be anything from a police constable to a sheriff to a High Court official. The caller usually poses as a friendly person who is trying to help the victim avoid the bailiffs by explaining that if they transfer the required amount, all shall be well. Payday phone scams trap people into parting with their hard earned cash every day. To boot, these shysters are also online.

How to identify payday phone call scams

It was not long ago that a ring of con men was uncovered in India. They had a scam going where they were calling people in the USA, and posing as officials, policemen, debt collectors and so forth. This consortium of criminals managed to pull in 5 million dollars before they were caught. So if Indian conmen can cheat and steal from American citizens, then who knows what we are up against. Here are a few tips to help you identify payday phone call scams.

  • If you are cold-called by a ‘payday’ company who is offering you a great deal on a loan, just turn them down. Companies that cold call you are rarely above board.
  • If you apply for a loan online, however, and are asked to pay a fee upfront, do not comply. No real payday lender will ask you to pay a fee before you get the loan.
  • If you are approved for a loan online or over the phone without a credit check or despite a bad credit record.
  • If you get a call from someone who says that he is a member of the police force, the sheriff or bailiffs office, or from the High Court who is talking about a loan or a debt that you have no recollection of or cannot remember applying for
  • If you get a call from someone who gives you an official title and then explains that the sheriff or bailiff are en route to your house or business.
  • If you have already fallen for the scam and transferred some money, do not make it worse when they call back and ask for you to re-transfer because the initial amount did not come through and time is running out.

All of the above are examples of payday phone call scams. If you find yourself in the unfortunate situation to be a victim of a payday phone call scam, then one of the best courses of action is to take down the name, the company or official body, and telephone number of the person you are talking to and hang up. Call them back. 10 out of 10, you won’t find them.

Payday loan companies and price comparison website (PCW), what does this mean for payday loan companies?

The payday loan sector has been under investigation for the past 20 months and an independent panel of members of the Competition and Markets Authority (CMA) published their findings in June of last year. The publication has led to much scrutiny of the payday loan sector as well as new standards and legislation being passed. Payday lenders have now to contend with stricter measures of doing business which, if looked at in a positive light, sees these operations moving a step closer towards joining the reputable financial sector such as banks, buildings societies, credit unions, etc.

Online payday loan operators must be registered

One of the defining proposals made by the CMA to the Financial Conduct Authority (FCA) is that payday lenders that operate payday loans online must be registered on at least one Price Comparison Website. The FCA is authorised to enforce and control the process.

What is a payday loan Price Comparison Website?

With all of the scamming, stealing and cheating that has been rampaging around the internet for the past few years disguised as ‘payday’, the CMA has come up with an ingenious idea. We have all heard of at least one horrific story of somebody trying desperately to borrow some money online and instead having their bank account cleaned out. The Price Comparison Website makes things a lot simpler. Basically, a Price Comparison Website is a big friendly dog who likes to play fetch. You go to the website and tell them what you want to borrow and how, when, and why, and off it goes and comes back with a whole bunch of options for you. The best thing about our PCW game is that you know that the big dog is ‘friendly’. No scams, no nonsense, no sharks, which is the best news that payday loan companies that are doing bona fide business have heard in a long time.

A Price Comparison Website is not the middleman 

It has been a growing problem with the so called ‘middleman’, especially online, that poses as the payday lender itself. They are simply intermediaries. They set up practice to look like a payday lender and promise the best deal for the customer. Instead, they sell their ‘customer’s’ details to the highest bidding payday company. It doesn’t shine a very good light on anyone, and it’s difficult to ascertain what is what from a computer screen. The Price Comparison Website looks to change many options, and payday companies will have to sign up for an FCA registered site.

Simon Polito, Chair of the CMA’s payday lending investigation group, had this to say:

“To help them [payday lenders], we are requiring lenders to be listed on price comparison websites authorised by the FCA and have recommended to the FCA that these websites should carry all the information customers need to compare easily the total cost of different lenders’ loans. This will promote competition and provide the incentive for new and existing lenders to compete to offer lower cost loans and win borrower’s business. It will also make it easier for new entrants that offer lower cost loans to access customers.

Payday phone scam: How fraudsters piggyback off of the payday industry PART 1

The Payday phone scam: it has been going on for a while and has become a major problem for the industry. Scammers continue to ride on the backs of payday companies. Over the past 18 months or so, conmen have begun to target innocent victims online and over the telephone threatening to seize businesses, send sheriffs, and freeze bank accounts unless these fictitious loans are paid immediately. People get scared and pay up on loans that they never took out. Payday phone call scams have been officially dubbed ‘vishing’, and it looks like they are here to stay. As soon as one of their methods is detected, they change the tune of their song and quickly manipulate the scam to keep on cheating their victims.

How a small business can get caught in a payday phone scam – An example:

Martin owns a small coffee shop in the heart of London and is doing well for himself. Most mornings the early shift runs into lunch without stopping, and the staff are kept very busy. Martin received a phone call on one such busy weekday from a man claiming to be a sheriff from the High Court. The man identified himself as Steven Roberts and told him that he was overseeing a court judgement against him by a firm that claimed he owed them money for an online loan. Mr. Roberts said he was calling to find out if Martin knew anything about it.

Martin had taken out a payday loan online a few years back but thought that he had repaid the entire amount. Mr. Roberts went on to inform him that this was apparently not the case and that he still owed them 1,987.12 pounds, and that his case was being heard at that very moment. He would have to make payment, or the bailiff would be coming over to the coffee shop in the next few hours.

Imagine Martin standing in a bustling coffee shop, staff rushing to and fro, customers demanding service and now the threat of the bailiffs’ imminent arrival. Martin jumped to it and transferred the money over the internet immediately. Check! Martin has been pulled into a payday phone call scam.

Unfortunately, that was not the end of the line for poor Martin. Mr. Roberts was not finished calling Martin. Shortly afterwards, Martin got another call. Mr. Roberts once again at the other end of the line informed Martin that the payment did not go through, that his bank had stopped the payment for some reason and that he should take it up with his bank. In the meantime, however, Mr. Roberts advised Martin that to make another payment into another account to keep the bailiffs at bay while he sorted out the first payment mix-up with his bank. Again out of exasperation, Martin made a quick transfer and went back to finish serving lunch to his customers. Once the dust settled, and Martin could sit down with the day’s takings and think about what had happened, he realised that something did not compute. He immediately called his bank.

It goes without saying that you should be suspicious, no matter how convincing the caller is. Don’t rush, think things through and check thoroughly!

Continued in Part 2