Payday UK

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The payday lending industry had seen a large boost in its growth the rules in force were not pro-actively monitored and changes were only applied after issues were discovered. The Financial Conduct Authority (FCA) took over regulation in April 2014 and have pro-actively set about 'sorting out' the payday market. The introduction of new rules has lead to a number of lenders leaving the market.

One of the major reasons of the lenders leaving the industry is that a strict cap has been levied on the fees and rates of interest that they are allowed to charge. Previously there was no cap in the UK. The FCA has levied a 0.8% of maximum cap on these payday loans. Also, there was no cap earlier on the penalties and default fees and the lenders used to notoriously depend on them. But now a cap of £15 per loan is in place for default charges. Finally, no High Cost Short Term credit loan can cost more than teh amount borrowed in interest and charges.

These changes have been welcomed by the critics and the borrowers too, because such harmful factors prior to the regulations were leading many people into a vicious debt cycle. This resulted in the borrower becoming more and more vulnerable to a huge financial crisis.

The regulations have also changed the use of Rollovers on single instalment payday loan. Previously customers would be unable to afford the full repayment to pay just the interest and carry the capital to the next month, where another months interest was added. This cycle could carry on virtually indefinitly. The rules now limit rollover to 2 and then only if the lender deems them affordable.

Another big change was the use of Continuous Payment Authority (CPA). Until the regulations changed a lender could attempt the payment from a debtors account when they were in arrears upto 30 times per month. Therefore being ready to 'suck' the funds out as soon as there was anything there. The new rules limit this to just 2 attempts before there is a need to contact the customer to get further authority.

So while the regulation changes may have been the death of some lenders, for those who want to 'do it right' these regulations means that this is now possible without being at a competatative disadvantage.