WHAT ARE PAYDAY LOAN

LENDERS

For many years the type of borrowing resource offered by payday loan lenders has been cleared into question by various consumer groups and consumers directly.

Many have questioned exactly how the market place as a whole is able to realistically serve the needs of consumers and therefore offer a product worth having. A harsh assessment you will likely agree but not all that surprising. For many years the payday loan lenders enjoyed great success when their product was introduced as a means for borrowing a small sum of money online, in a timely and convenient manner. These type of loans were not ‘readily’ available from any existing lender and as such introduced consumers to a whole new financial market place. For many years the lenders and the consumers using the loans were happy the product was able to do what it intended; allow a small loan to be borrowed until the customers next employment pay date, at which point the loan was repaid and the agreement terminated.

In reality however and as the years passed it became increasingly clear that the product on offer was no longer able to realistically serve the needs of the modern day consumer and instead was placing those applying and being granted such loans, in often increased financial difficulty. The payday loan lenders needed to change and it was the Financial Conduct Authority who set about showing them how.

The Financial Conduct Authority stepped in as the regulating authority responsible for the practices of the payday loan lenders a few years ago and since that time have been working with providers to understand what was being done and therefore what could be done to improve this massive consumer market place. What the FCA found (Financial Conduct Authority) was that often payday loan lenders were not correctly identifying which customers there products were not suitable for and of those that were; the product being offered was simply too limited. Through a whole host of consultations, the FCA was able to truly understand how the market operated and as such where improvements needed to be made.

What was very obvious to the FCA was the fact that payday loan lenders were continuing to offer a product which had become dated. The way consumers managed their money had changed compared to the early days of the market and as such the lump sum repayment offering was, in the vast majority of cases, no longer suitable. Instead the FCA guided payday loan lenders to be more flexible and therefore consumer friendly in their approach by advising instalment based repayments would be more suitable and therefore affordable. As such nowadays payday loan lenders offer just that with support and quidence from the FCA as to how such loans can be offered and afforded in a manner which is fair and consumer friendly. Changing of the product model lead to furthermore additional changes concerning how payday loan lenders review applications and support their customers after the point of approval.

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