PAYDAY LOANS IN England
Why traditional financial institutions despise payday loans in England
Consumers in England, living from pay cheque to pay cheque, report running out of cash several days before payday. They are more likely to turn to payday loan agents rather than to traditional banking institutions when faced with a cash-flow emergency.
Payday loans are an American trend that have taken England by storm. Since the beginning of the credit crunch late last year, the payday loan industry is on the up. UK consumers, from England to Wales are finding that they are no longer at the mercy of a bad credit score. Payday loan agents in England are five times more likely to extend a loan to hard working Brits trapped in a credit crunch thus allowing consumers to avoid expensive bank penalty fees which, in fact, make up a large percentage of a banks net operating income.
Traditional banking institutions are gearing up to wipe out PAYDAY loans in England
It’s not surprising to discover that banks and credit unions are using the power of media to portray payday loans in England as the poster-child for financial devastation, especially when you consider the enormous amounts banks throughout England lose to Payday loan agents. Just to give an example of how much is at stake, take for instance, the theoretical APR for a returned check “protection”, it averages 2400 %; Non-sufficient-fund fees average about ?20 per cheque, late credit card fees average ?15, over-the-limit credit card fees average ?17, multiply that by hundreds of thousands of customer accounts and you’ve got a whopping net income reaching hundreds of millions of pounds every year. Bogus figures used to discourage UK Payday loan applicants Payday loans in England are generally short term loans that are designed to help people for a short period of time. Why, then are cash advance loan agents required to advertise an Annual Percentage Rate if most all payday loans in England are offered for 30 days or less? Payday laons are not annual loans and in order for a consumer to reach a so-called 2000% APR, he/she would have to borrow the money continuously for an entire year. This is a an unlikely scenario in the payday loans market. Efforts by BIG banks to ban payday loans in England are a strong possibility Since payday loans are an American trend, UK consumers can probably expect to hear news of similar payday loan legislation in England. In some US states, Payday Loans have already been banned altogether. Recently, Morgan and Strain’s conducted a study which studied the implications of banning payday loans. It looked at how consumers fared in Georgia and North Carolina shortly after payday loans were banned in those states:
“Compared to households in states where payday lending is permitted, households in Georgia have bounced more checks, complained more to the Federal Trade Commission about lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. North Carolina households have fared about the same. This negative correlation- reduced payday credit supply, increased credit problems- contradicts the debt trap critique of payday lending, but is consistent with the hypothesis that payday credit is preferable to substitutes such as the bounced check “protection” sold by credit unions and banks or loans from pawn shops.” (note 6 ).
To highlight the tremendous effect of the payday loan ban had in relation to the rise of returned checks, Morgan and Strain reported:
“On average, the Federal Reserve check processing center in Atlanta returned 1.2 million more checks per year after the ban. At $30 per item, depositors paid an extra $36 million per year in bounced check fees after the ban.” (note 8 ).
Could payday loans in England soon become a thing of the past? There is no telling just yet whether or not payday loans in England will be banned. Tentatively, you can still apply for and receive anywhere from ?50-?1000 from several payday loan agents in England. However, financial lobbyists have teamed up with consumer protectionists and have led the charge against the payday loans industry in England. Those who have opted to side with an old-world system that is responsible for landing so many UK residents in deep financial troubles in the first place are prepared to use every trick in the book to ban the payday loan industry in England and possibly in the entire world. A recent well researched article released by STATS.ORG concluded with this note on the payday loans industry in general:
“Every industry contains malefactors who deserve to be exposed. But every industry is also based on incentives that need to be explained, in order to fully understand the relationship between business and consumers. It is here that the media are often sadly lacking, as the case of payday loans illustrates”
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