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Treasury urges banks to pick up payday loan customers

The Treasury is calling on banks to pick up payday loan borrowers after the FCA imposed a cap on interest rates.

The Financial Times reports a letter from the Treasury has been sent to major banks and the British Bankers’ Association in recent weeks urging them to raise awareness of services that might be used by payday loan customers.

From January payday loans will be capped at 0.8 per cent interest per day while borrowers will never need to repay more than twice the value of the loan.

The tough changes have led to fears payday lenders could be put out of business and leave a section of the market under-served.

The FCA estimates the market will shrink by 7 per cent under the new rules with 70,000 fewer payday loan borrowers.

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There are 4 comments at the moment, we would love to hear your opinion too.

  1. It was the banks’ love of charging disproportionately punitive fees for unauthorised overdrafts and the like that helped stimulate the boom in pay day lending in the first place. £15 interest from Wonga or a £35 overdraft fee plus daily penalties from the bank – anyone can do the maths.

    “Treasury orders clampdown on frying pans, wants to promote awareness of the benefits offered by fire”

  2. This rather overlooks the high probability that the majority of people who use payday lenders do so because their bank has turned down their application for an overdraft. With payday lenders now required to assess affordability in a way they’ve never had to in the past, the banks are hardly likely to approve applications for loans that have been turned down even by a payday lender ~ are they?

    The cold hard reality is that some people have such dire credit ratings that getting even further into debt is unlikely to achieve anything other than to make their situation even worse. That can’t be fixed just by urging banks “to raise awareness of services that might be used by payday loan customers”. What services does the Treasury have in mind?

    Given the lambasting that banks have suffered due to irresponsible past lending practices, just how many of them are likely to be prepared to step into the payday loans arena? I imagine that most if not all of them will give the whole idea a very wide berth.

  3. This just proves how completely out of touch Government and the Treasury are to the day to day realities of life for millions of people.

  4. To be honest I do not understand the reason why the rules are changing and why the government tries to close such financial unions. I think that they make a huge deal helping people who have been considered to be unreliable and whose applications were rejected. The government has not proposed the other variant for such people, that is why they need a help of http://vitaloans.co.uk/ for the time being. And moreover I do not think that any changes are necessary and profitable to the government.

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