PayDay loans
Advice
What are Payday Loans?
Payday loans are a form of short-term, non-priority credit, which are intended to be repaid from your next payment from work. Payday loans have extremely high-interest rates, making them unsuitable for long-term borrowing. Whilst Lestons are not registered financial advisors the APR (Annualised Percentage Rate), which is sometimes over 1,000% makes it obvious that we would never countenance this avenue as a solution to long-term lending.
What laws and regulations are these loans based on?
The Financial Regulation Authority (FCA), regulates lenders according to the Consumer Credit Act 1974 and 2006. These lenders will hold a suitable licence from the UK Office of Fair Trading.
What laws and regulations are these loans based on?
Lenders are regulated by the (FCA) but have their basis in Contract law and financial legislation. The FCA has made clear that High-Cost Short Term Credit (HCSTC) or colloquially, payday loans have limits on what may be charged at any one time.
As of 2015:
- Interest and fees charged must not exceed 0.8% per day of the amount borrowed, even when rolled over;
- Default Charges may not exceed £15. The interest rate on the borrowed amount cannot go over the agreed interest rate of the initial amount borrowed; or
- Borrowers should not have to pay back more than the amount borrowed in interest. (e.g., if you borrow £200 at maximum the fees and interests charged to you should not exceed £200).
Payday lenders are also subject to the Consumer Credit Act 1974, where lenders must be approved by the UK Office of Fair Trading to offer credit. Statistics regarding payday loans may be found on the FCA website (note that the data includes information before the 2015 price cap regulation) and data from after the regulation was put into place.
If I am struggling to pay?
If you are struggling to pay, you should call the lender. Sometimes they may offer to “help you out” by providing more money at a lower APR over a longer-term. This, however, may be designed to increase your total level of debt and liability. If you, can we would suggest taking the obvious route and aiming to refinance the debt with a lower APR.
Continuous Payment Authority (CPA) - how do I stop these payments?
CPAs allow lenders to take payments from your accounts to pay off the loan. You may stop CPAs by either writing to the loan company or the bank where the payments are taken from.
Can I get a refund on my loan?
There are limited circumstances in which people can gain a refund on their loan - these are where the lender has not acted responsibly. In this context, it means that they lent you money without first checking whether you can repay the loan. If this is the case, you may be undergoing severe financial problems which may entitle you to a full or partial refund. If you feel the lender has acted unreasonably, then write to the Financial Ombudsman Service giving much detail as possible. This may include situations such as:
- You have had to take another loan to pay off the previous payday loan;
- You have had to take out bigger repayment loans;
- You have not paid an important household bill to repay the payday loan; or
- You have managed to pay the loan by not buying enough food that month.
How we can help
Lestons can intervene and discuss options with you to resolve the matter, we could, if instructed appoint one of our excellent third-party independent financial advisors who can look at the market for you to try and get you a loan at a more sensible rate to allow you to pay off your payday loan. Please note we make no commission from these referrals but do need clients to open a case so that we can prepare a financial brief for them. To gain our assistance you need to open a case, this is done by simply clicking on the link at the top of the page, you will then need to deposit a sum equal to one hour’s usage, upon receipt of these funds you will be assigned your personal caseworker who will telephone you to discuss the matter and make suggestions on how to proceed.
Please note your caseworker can only give generic advice, their role is to prepare your details for handling by our appointed financial advisor and to act as your point of contact, they will also issue you with your Password and PIN, these will be needed to log onto your client dashboard. From your dashboard you will be able to manage and view every aspect of your case, upload documents, images, files etc.