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Payment day loan client research: Multimillion Americans became payday creditors due to the global economic downturn, high levels of joblessness and limited credit facilities. ¿Who uses these credit facilities, which at first sight are very high? Twelve million Americans use payday mortgages at least once a year, according to Pew Charitable Trust Research carried out in 2012.
Borrower borrow an aggregate of eight $375 credits and interest of $520. 69% of borrower cases use payday loan to meet unanticipated expenditures such as medicines, auto repairs or mortgages. The payday loan they receive are of small quantities, they are useful though. With no payday loan, they would have to defer payment, depend on relatives or personally trade items to recover their costs.
Payment day mortgages are most loved in Midwest and South Regions of US. Around 8% of the adult payday loan populace has used at least once a year in Texas, Louisiana and Oklahoma, another states where payday loan facilities are most common, are both Dakotas, Nebraska, Kansas, Missouri, Iowa, and Minnesota.
Effects of the FCA regulations on the payday loan sector
The Financial Conduct Authority (FCA) adopted tougher regulations for the granting of payday loans in 2015 in order to control the markets and make them more fair to creditors. And the new regulations included: In order to gain an understanding of the effects of these changes, we compare customers with HCSTC debt who joined us in the first half of 2013 with customers with HCSTC debt who joined us in the first half of 2016.
In addition, we interviewed customers with HCSTC debt who had requested a payday loan since the more stringent regulations were introduced. What has happened to the payday loan business? The results show that, despite some positive indications of recovery, the HCSTC markets have evolved and adjusted to a new postprice capping environment.
One example of these changes is the implementation of installment credits, usually between 3-6 month. Instead of the (intended) one-month redemption term that was characteristic of payday credits. It is clear that bad practices is still apparent in the payday loan industries. We call on the FCA to examine more closely credit policies in the HCSTC markets.
A lot of customers were telling us about the impossibility of choosing between taking out high priced loans, not having a budget bill or not having enough cash to cover essential expenses such as nutrition for their families. In our review, we call for more to be done to make this way of crediting better for the borrower, and we examine what alternatives of more accessible loans are needed for the weaker.
As part of its revision of the maximum limit, the FCA should examine the impact of the transfer to deferred credits on the appropriate amount of the maximum limit. DCA should tighten its governance framework for credit, to include the transformation of its current governance guidelines into governance standards.
Thus, for example, solvency evaluations should be necessary to take into consideration whether the client has difficulty with its current financing obligations. The HCSTC creditors should make sure that their collections practice is built on assisting with reasonable and sustained redemptions and adequate assistance to assist clients in difficulty. DCA should secure regulatory coherence across different types of high-cost and sub-prime lending to solve the issues experienced by endangered consumer groups.
Governments must look for new ways to improve accessibility to more accessible collateral networks for the least well-off, include interest-free and low-interest loan programmes internationally.