15:43 21 November 2013
The Charity Citizens Advice claims we need “strong and instantaneous action” against payday loan companies, which are “out of control.” Sometimes it seems like it would be good to get rid of them altogether. Nevertheless, they do provide a safety net to people in emergencies who cannot get a loan because of poor credit ratings. A payday loan can prevent a desperate deal with a loan shark or a doorstep lender.
So how can we make them more safe? Here are four steps to fixing the system from your side:
1. Payday loan lenders should verify affordability
Do not assume payday lenders will use common sense and methodically inspect the affordability of a borrower. Most payday loan companies have signed on the Good Practice Customer Charter, which requires them to perform a sound, suitable and proper assessment of their affordability. This means they make sure a customer will be able to afford the loan they provide. Hold them to this.
2. No more lending overnight
Payday lenders are ready to lend money all night for probably the same reason burger resteraunts and takeaways remain open after hours - to grab a few extra customers who might not take loans otherwise. Do not be trapped by convenience. If you need money, think it through and apply for a loan when you are fully awake and… well… sober.
3. Speed should not be made a selling point
Customers may need money on the same day they apply for a loan for an unexpected bill, but hardly anybody needs it within ten minutes. These ridiculously fast payday loans only encourage people to be irresponsible about borrowing.
4. Restrict Rollovers
Payday loan lenders claim that their interest rates will not hurt customers because the loan only lasts for a month. What about rollovers then? Delaying payment for just one month doubles the amount of interest to be paid. Before you know it, the debt will build up. So just like fast money, the option to roll over payments is enticing and dangerous.
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