Recent figures have just been released by StepChange, the debt advice charity in relation to hardship loans. They state that the number of people suffering hardship with Pay Day Loans has increased by over 40% in the last 12 months.
To combat this trend the debt charity says the Financial Conduct Authority (FCA) should put a cap on Pay Day Loan cost. They state action should be taken because the figures show an upwards trend for debtors getting into difficulty due to taking out Pay Day Loans. To support its contention, the debt charity say that in the first 6 months of 2014 it dealt with nearly 44,000 debtors who were in trouble. The comparable first half of 2013 showed them dealing with just over 30,000 cases.
The FCA is already in the process of consulting on plans to cap the costs of Pay Day Loans. It is broadly in support of StepChange’s findings and supports the idea in principle of cutting the costs of the loans. Other ideas and proposals will be considered in the consultation period, such as capping the amount that anyone should be required to pay back at no more than twice the original amount borrowed.
However, many debt charities are campaigning that the proposed cap should be much more stringent. StepChange say other proposals should be taken on board. For example they have suggested a maximum fee of £12.00 should be levied with regard to someone who defaults on repayments. This would bring the default charge in line with those for credit cards. The FCA is currently suggesting a fee of £15.00 if someone defaults on repayments.
The period for consultant for a cap for Pay Day Loans closed this week. There has been intensive lobbying and input from debt charities to try and ensure that changes go far enough to make a difference to the widely criticised industry.
The FCA will make known the size of the cap they will apply later in this year. It will take effect at the start of 2015.
For any advice in relation to debt issues, please don’t hesitate to contact our personal insolvency solicitors. We offer free initial advice on bankruptcy, IVA’s, Debt Management Plans and debt issues.