Which? demands reforms to Payday Loans
Consumer favourite Which? has launched a new campaign to ‘clean up’ the credit market as other forms of credit can be just as expensive as the heavily criticized Payday Loan sector.
The recent criticisms of the Payday Loan market has in fact drawn attention to other forms of credit that can be just as pricey, namely in the form of authorized and unauthorized overdrafts. Which? discovered that borrowing a £100 for 31 days with an authorized over draft can cost you £20 with some Santander accounts and £30 with Halifax, comparably borrowing £100 with a Payday Loan company such as Quick Quid or Wonga costs between £20 and £37. Unauthorized overdrafts are also incurring high default charges if they are being utilized for long periods of time – a Halifax Reward Current Account and a Santander Everyday Account can cost £100 in charges if you dip £100 into an unauthorized overdraft for a month.
The Clean up Credit campaign have called on the Financial Conduct Authority (FCA) to tighten up on unfair lending.
Which? have urged the FCA to toughen up on lenders and freeze charges when a borrower finds themselves in financial difficulty and prevent them from charging interest on high cost loans beyond 30 days after borrowers default. The FCA recently imposed measures to improve the consumer credit market including limiting the amount of times pay day lenders can roll over loans to two and adding risk warnings on their advertising, A payday firm will have to explain to the borrower how the costs will escalate under a loan roll over and provide free debt advice to the customer. Which? are pushing for a ban on excessive default fees and charges, with a cap on the total amount of default
Which? want to hear from consumers about their experiences of using credit so it can share them with the FCA , who will hopefully make plans to clamp down on the sector.