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Bad credit loans are for people with bad credit histories.
Payment day creditors are biting back: "Do not call us loan sharks".
Everybody it seems has a shocking history about paying day loan. Sick of hearing such tales, the payment day loan industries are being denounced by parliamentarians, locals, newspapers and even the Archbishop of Canterbury and are now struggling to enhance their name. "The critics are communicating wrongly by describing this sector as a legitimate loan shark.
Cause it blurs the edge for humans what a loan shark actually is," says Caroline Walton, UK Dollar Financial's Director of Finance, owner of The Money Shop. So far, The Money Shop has been refusing to allow journalists to see their clients or follow the credit proces.
What does a 100 pound payment day loan costs? That' s why my cabbie takes me to Bullwell, a borough of Nottingham, where The Money Store has two of its 575 stores. Shops - flat glasses and gaudy yellows - look out over the High Street for the whole globe, as if it were a shining new subsidiary of a banking establishment.
However, with a typically annual percentage rate of 3.000%, are the credits offered here really the bad that they are thought to be? The garbage man Chris Riley asks at the ticket office, "Can I borrow one of these payment day credits? Beyond him is Damien McGlinchey, a 27-year-old nursing assistant who has looked in to repay his loan of 280 pounds, which was intended for a slightly more reckless use.
" What all clients have in common, however, is discontent with the bank. "Chris Riley says the bank won't help." Money Shop shoppers are paying 29. 99 to lend 100 pounds for a whole months. They also warn that if clients cannot obtain a loan through a paying borrower, they are likely to turn to non-regulated borrower.
It says those kind of guys who "operate under the radar" are the true ones. Money Shop's rates are lower than its competitor Wonga's, which charged 37.15 to lend 100 pounds for a whole months, but much more than a traditional cooperative. Loan cooperatives - non-profit organizations that are members of their members - were supported by the Archbishop of Canterbury, Justin Welby, who wants them to push daily payers out of the business.
Some of them, such as the London Mutual Credit Unions (LMCU), grant payment day credits. Such a loan will cost you £11 plus 2 in the form of a £2 subscription. Says Jane Simonds, from MM Advice Service, that when you need to lend someone a loan, a cooperative is a good place to do it.
"There is a limit on the amount of interest they can calculate on their credits of 2% per months or 26. "Yet some cooperative banks have insisted that you first cut corners on them before they let you take out a loan. "Of course, many clients have little option, but turn to a payment day creditor.
Bankers are reluctant to take out payment day mortgages, and few individuals have direct recourse to them. But by going to a regular payment day creditor that is a member of the Consumer Finance Association (CFA), they are at least given some guarantees that go beyond the government's client chart.
To put it another way, the cab driver's tale of a guilt increasing from 500 pounds to 16,000 pounds is more of an urbane legend than a real tale, especially if the creditor was a CFA member. 19 payment day creditors who have not adhered to this policy have already left the deal after the Office of Fair Trading (OFT) has written to the 50 largest UK providers.
Another six creditors either withdrew on a voluntary basis or had their licenses cancelled by the OFT. However, are paying day creditors who make the consumers a sensible offer, or do they make good profit with the low wage? Looking at the US DFC Financial's DFC worldwide subsidiary's earnings, it can be seen that although the firm is active in 10 different parts of the globe, half of its earnings come from the UK.
Acting as Instant Lenders ltd, Dollar Financial UK last year announced gains of £34.6 million to Companies House. However, only part of this would be from the payment day loan sector, as the firm also has a number of pawnbrokers, some of whom also work under the Money Shop name.
Early this year, the firm also said that UK earnings would be put under pressure as a consequence of OFT research. But, in any case, Caroline Walton has no ethical concerns about how her business earns moneys. "We' re offering our clients a service," she says.