Yesterday’s big story on the personal finance front was the Government’s announcement about capping payday loans.
My first reaction was to look up Simon Read of the Independent, because he’s been a leading campaigner for regulation of the payday loans sector.
His article, in yesterday’s issue of the paper, reports on what was being said by the politicians; some predictable sparring there. I was more interested in Simon Read’s own overview of how effective these measures would be, so I went straight to his summary at the end. No apologies for reproducing it here.
Q&A: What should be done?
Q: Will a cap on the loans help people avoid falling into debt problems?
A: No. The key issues surround the widespread lack of responsible lending.
Q: How could payday lenders be more responsible?
A: One option would be to introduce compulsory affordability checks. Lenders often make greater profits from rolling over loans than from the original deal.
Q: How should they be stopped?
A: The regulators have already announced plans to cut back the number of rollovers allowed and the number of times lenders can try and recover their cash from people’s bank accounts. But their advertising also needs to be restricted.