The international pay day loan market

Friday, 19/06/2015

The UK's pay day and same day loan companies now offer a variety of flexible and fair value credit to people who need it. And they are regulated to ensure that no customer gets into too much debt over a loan. That means cheap, instant and affordable credit to most, and protection for those who can't afford it from themselves. We're also seeing marketing of loans change to reflect changing customer needs.

Better regulation is a worldwide trend. Japan in the early part of the 21st century capped interest rates at 20%, to prevent Japanese organised crime getting a foothold in the market. 

Japan was followed by Australia, where most states set tough limits on interest rates. However, Queensland and New South Wales left their markets unregulated for a number of years, before introducing interest caps. It was soon clear to see that customers were getting into more trouble in the unregulated states, which is why they eventually set interest rate limits to curb the problem and bring them into line with their neighbours. Now Australian loans are covered by a Uniform Consumer Credit Code, with a top rate of 48%. 

In America, rules and laws vary wildly by state, with the APR rate, total chargeable per $100 and the total number of loans one person can have at once all part of the consideration. So, in California, someone can borrow a maximum of $300 for 31 days, with a maximum fee of $17 per $100 for a 14-day loan, and are only allowed a single loan, to limit them getting into further debt. Also, pay day loan lenders can only collect late payments in accordance with the Fair Debt Collection Practices Act, which prevents overly aggressive action if people do get into trouble. In some states, same day loans are effectively banned, reflecting local concerns about debt.

If pay day loan vendors had examined these markets in the early days, perhaps they would have avoided some of the negative press they have garnered. However, now they are regulated and provide a balanced lending option for some customers.

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