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What Next After Payday?

Written By On 22/05/2014

If you were to ask a close relative to lend you £40 for no longer than a week so you can settle an urgent bill, then you buy them a small gift to say thank you, nobody would blink an eyelid.

However, if that gift was say a box of chocolates, ranging between £4 to £5. you would be paying back an APR rate of somewhere between 10,000 and 50,000 per cent, depending on the actual cost.

Now for somebody deciding to borrow that same amount at a far more reasonable rate from a payday loan company, both the media and many politicians alike would crucify the practice.

Ed Miliband campaigns strongly against the payday industry. The leader of the labour party claims:

Payday lenders are responsible for a quiet crisis of thousands of families trapped in unpayable debt.

The Financial Conduct Authority are the new watchdog as from the start of last month. They took over from the OFT and have enforced much stricter criteria for all forms of short term loans. The banking and credit card market are also being targeted.

It is estimated that approximately one third of payday loan firms will leave the market, which could result in around three quarter billion pounds less for loan availability per annum.

With the Cheque Centre being the latest in the stream of lenders to stop offering short term cash advances, their previous competition are deciding whether to follow suit.

Even though tougher restrictions are a good thing, the avenue it appears to be going down may lead to something far worse.

The payday industry was introduced and continued to grow because of the need for it. For the majority, those wishing to borrow a small amount for a little time to help them through a difficult period, had a positive experience.

Now, with what may be in store, we should be careful what we wish for.

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