Money is essential for lots of things, and you’ll soon start to feel the pinch when you don’t have it. Unexpected bills, broken boilers, and dead batteries in cars are just a few of the sorts of financial emergencies that people face on a regular basis, and none of them are cheap. This is when most people will look for financial support in the form of borrowing money. One of the most common is a payday loan. Nowadays, you can even get a payday loan with bad credit from a direct lender, so no matter your situation, you can find help. When it comes to payday loan lenders, you might have been aware of the issues they faced a few years ago and may wonder whether or not they’re regulated financial bodies. So, keep reading and discover if all payday lenders are regulated…
What Is A Payday Lender?
A payday lender is a broker that offers members of the public payday loans. A payday loan is where you essentially borrow money against your future wages, with you paying it all back in a short period of time. These types of loans are utilised every day by people who need quick cash in an emergency, and they can be useful if used correctly.
Payday lenders do face a lot of different regulations that they must adhere to. This is because in 2014, the Financial Conduct Authority (FCA) became in charge and introduced lots of new rules they have to follow. These regulations are in place to protect customers and ensure that they’re not taken advantage of, as most people who take out payday loans are in quite difficult situations. So, here are some of the regulations that payday lenders need to follow:
Pricing now needs to be extremely transparent. In fact, all payday lenders have to show a representative example with APR next to any claim on their website and marketing materials. This means all customers will see the actual price of the loan, not just the amount they can borrow. Being so clear about pricing means that all customers will be able to easily see how much money they could be getting into debt with, before applying.
Caps On Charges
One of the biggest transformations that the FCA brought in was a daily price cap of 0.8% on all charges. Payday lenders cannot charge customers any more than this to ensure that they won’t end up repaying double or more than what they originally borrowed. Before this price cap was implemented, some lenders were charging 1% per day, making it very easy for people to spiral into a lot of debt in a short space of time. Caps were also brought in on default charges of £15. This means any customer who misses a payment cannot be charged more than £15 and they are also given breathing space for up to 36 hours as well. Previously the default fee could have been any amount at all, and it could be charged as many times as necessary. However, thanks to the FCA, this can no longer happen, and customers are much more protected.
To even become a payday lender, there are certain regulations that they must adhere to in order to receive authorisation from the FCA. The process is quite long, but this is so that the FCA can ensure all lenders are legitimate and have the customers’ best interests at heart. The authorisation checks are the following:
- Checking of the lender’s business plans
- Confirming that they have financial reserves
- Strict background checks on any directors
- Making sure that they follow the correct processes for data protection and payments
- Checking that they’ve had the correct training in data protection and compliance
- Ensuring that they have regular compliance checks
These regulations may not seem like much, but they really help to ensure that only legitimate payday lenders are able to serve customers. The actual process of authorisation can take up to two years, so lenders have to be dedicated to providing the best service possible. It will also cost payday lenders anywhere from £1,500 to over £20,000 and you can pay even more if you start to get solicitors involved.
Payday lenders have come a long way thanks to the FCA and their new regulations. Customers are now more protected than ever and are able to borrow with peace of mind. So, the answer to the title of this articles is yes, all payday lenders are regulated, and they couldn’t operate without being so. The FCA has brought in some amazing regulations to help keep customers safe from fraudulent lenders, allowing you to take out your payday loan without worry.