New regulations on payday lending companies in Britain has resulted in a stagnation or slow down in the payday lending industry there, according to numbers from the FCA (Financial Conduct Authority). After strict rules per imposed in April of this year by the FCA, approximately 100 of Britain’s top 210 have stop offering payday loans. That’s a huge decline.
“We have said before that firms would need to improve their operation or exit the market, and we are now seeing that happening,” said a spokesman for the FCA.
QuickLoans.co.uk, one of UK’s biggest payday lenders has already left the market, according to it’s recent announcement that it will stop offering payday loans because of the, “continuing, even increasing threats of political interference by the Governments.”
The same has been seen in the U.S. with federal government interference in lending under Dodd Frank with the creation of the CFPB (Consumer Financial Protection Bureau). But is government intervention the answer? Limiting the predatory lenders in the market by using blanket rules may protect consumers but it will also certain limit the overall availability of credit. Proponents of the FCA in Britain and the CFPB in the U.S., say these new financial regulations aimed at protecting consumers are long overdue and will end unnecessary abuses. Where do you stand on this issue? Is government intervention the answer?
Posted by Corey Curwick Dutton
If the government doesn't step in the pay day lenders will rob every consumer who needs a few pennies to make it to the next pay day.
Payday loans are expensive because the risk of default is high and because there is a high fixed cost for servicing a loan. It's a pretty good clue that payday lenders aren't charging extortionist prices when you see just how many companies are in the business. Very competitive markets don't have outrageous margins.
The problem is that people who want to regulate these high cost loans have never known anybody who actually needed to get a short term loan. They don't move in the same social circles. Therefore people in the cloistered environs of London or Washington DC can truthfully say they can't see a reason for such expensive loans.
But it's not because there's not a market for short term loans, it's just that the regulators never went to school with such people in Oxford or Yale. Which says more about our regulatory system than the people needing short term loans.
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