Are ‘payday loan’ providers under-regulated?
Over the last few years the cost of most essential items has risen significantly. With everything from groceries to petrol rising people have been forced to try and stretch their income further than ever before and further than it can go. Because of this a growing number of people are running out of money before the end of the month and are having to seek payday loans to get them through until they get paid. The problem is however that the companies offering these loans do so at high interest rates and let people use them over and over again.
These payday lenders have very limited regulations to abide to once they have a license in accordance with the Consumer Credit Act of 1974. People start out by looking for a little bit of help to get them through until payday but they then start using these loans often and the debt becomes much more than short term and eventually reaches an unmanageable level.
The issue with payday loans is that when people take them out and repay them when they get paid, it leaves them shorter the next month and so they need to borrow more. This cycle continues until the amount they need to pay back surpasses their income and what they then have is debt.
There are no regulations at the moment which are in place to stop people from borrowing continuously each month. This means lenders can repeatedly let people borrow even if it is irresponsible of them to let this happen.
There has been a great deal of attention given to this type of lender and many have asked for regulations to be put in place and for an obligation for lenders to make borrowers aware of how the loan will affect them. People have also asked for a cap on how many times people can borrow over a certain period to try and prevent them from borrowing more than they can afford to repay.
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