Marketplace for payday loans highlighted by banks' deal
(04 April 2006)
Recent news of a partnership between four of Britain's top banks, aiming to tackle the problems posed by unaffordable lending, has added further clarity to the role of the payday loan and also demonstrated that some of the problems provided by longer-term credit are now acknowledged by providers themselves.
HBOS, HSBC, Lloyds TSB and the Royal Bank of Scotland have agreed to put their heads together alongside that of Callcredit, the credit referencing agency, in order to ameliorate their understanding of what – and when – customers can and cannot borrow.
This will involve significant amounts of information sharing – with the banks supplying information such as customers' income and current account details to Callcredit, which will in turn provide information about customers who are seriously indebted along with daily alerts about people whose debt levels have changed sharply for the worse.
Callcredit managing director John McAndrew explained: "The government wants more customer protection for borrowers and the lenders want to provide a better service to their customers.
"We are delighted to have been able to help the industry achieve this. It is true that only a small percentage of customers are over-indebted and our initiative provides additional opportunities to offer these customers appropriate advice and support."
On a similar note, Barclaycard said recently that it is increasing the number of applicants it rejects for credit – and last year joined several other financial providers in agreeing to provide more information to referencing firms such as Callcredit.
All of this provides a valuable reminder to the customer whose credit needs are in the shorter term. It does little good to apply for a long-term deal when finances are stretched or when your use for the money will be more immediate – perhaps for a wedding or holiday, or to pay off some of the utility bills whose prices seem subject to frequent hikes. As much as anything else, you run the risk of damaging your credit rating for future services if you are not certain that you can fulfil payments and costs in the longer run.
While the actions of Callcredit and the four lenders are commendable, their realisation of the gravity of the nation's £1 trillion of long-term consumer debt may accentuate the role of short-term loans in the market. A payday loan of between £80 and £1,000 will be repayable as soon as your next monthly pay packet has come through, meaning that you will not be borrowing any more than you can afford in the immediate future and will not be stuck with obligations for months to come.
Callcredit's own poll found that one in ten consumers have debt levels which are not sustainable on a long-term basis – findings which serve to highlight the fact that many people are biting off more than they can chew when a smaller, more manageable amount of cash may serve their purposes well.
A reputable, established service such as that provided by My Payday Loan ( http://www.mypaydayloan.co.uk ) can fulfil your needs without necessitating any outlay which might sting you other the coming months or years – and can help ensure that your chances of receiving longer-term credit later when you most need it are not jeopardised.
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