With more and more people turning to short term loans to balance their finances and give them some leeway with respect to money, it is good to know that there are rules and regulations in place that will help people receive fair treatment from the companies that provide them with loans. There is a desperate need for fairness in the consumer finance market and the presence of the FCA ensures that this occurs in the United Kingdom.
There is a wide range of rules and regulations imposed by the FCA and the organisation ensures that companies are meeting these requirements. This makes life easier for borrowers, which is definitely something that people are looking for. While it is important that lenders take the time to review their options and find the loan that is best suited to their needs, this isn’t always possible. A lot of people turn to short term loans because they need help in a hurry, and this means that they may not always make the best decision for their long term finances.
This is why the presence of the FCA has to be of benefit because it gives people an additional level of confidence that they will receive a fair level of treatment when it comes to borrowing money. Some of the most pertinent and important regulations offered by the FCA include:
Lenders need to make sure that Applicants can pay back what they borrow
This is a very important step and it means that lending companies have to review their applicants and make sure that they are in a position to pay back loans. One of the biggest complaints regarding payday loan companies is that some firms weren’t bothered about checking the suitability of clients. This meant that a lot of people who would be in no position to pay back a loan were allowed access to funds.
This led to these people being placed into a deeper level of debt and their financial status got more treacherous. This is why the requirement for firms to consider the suitability of applicants has helped prevent the people most at risk of falling into further debt from being exploited.
Lenders have to showcase their Interest Rates and APR
Another positive step brought about by the work of the FCA has been the fact that lenders are required to showcase their interest rates and APR. This provides applicants with more information, which allows them to review what option is best for them. This has to be seen as a good thing because there are many different firms operating in the short term loan market and not all of them are the same or provide the same sort of loan.
There are many different types of loans on offer and when companies are required to provide interest rates and APR to their clients, they offer up the information which allows people to make a more informed decision, which can only be a positive thing.
Loans can only be rolled over twice
One of the biggest issues in the payday loan market was the fact that loans could be rolled over and over. This means that an applicant could find themselves facing a huge debt without having any real hope of paying the money off. This is no longer the case as loans can only be rolled over twice before they are capped, which prevents an individual’s levels of debt from rising to a huge sum.
Fees and interest charged must not be greater than 0.8% of amount borrowed every day
Knowing that there is a capping of fees and interest levels is a positive move for most people, because it allows them to budget and stay in touch with what they are likely to pay. This level also means that many companies cannot charge excessive fees which may catch out their clients. While it is important that applicants review all of the terms and conditions, it is also important firms are not allowed to catch people out with excessively high fees.
A Cap of 100% of the original Loan
Again, this is another way that firms are unable to charge excessive amounts for fees and it should provide applicants with a level of confidence about how much money they have to pay back.
If a borrower defaults, Fees will be capped at £15
Default fees were a common way for lenders to bring in a lot of money but the implementation of this cap has provided applicants with a greater level of confidence.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.
