Few years ago A the industry microcredit UK does not have a high level of regulation, and many investors were unhappy with the situation. Loan organizations to set their own interest rates, often astronomical, charged all sorts of dishonest Commission erred when calculating behaved aggressively towards customers. As a result, micro-credit predictably became the most expensive type of lending in the market.
However, this fact does not stop many from British microcredit or "payday loan", as it is called in Albion. As a result, the market began to be measured in billions of pounds. According to the Office for Competition and Markets (CMA), in 2012-13, there were 1.8 million microcredit borrowers. According to another estimate, in 2013 at the hands of 1.6 million borrowers had taken 10 million loan, which indicates that many took several loans, sometimes at the same time in different firms.
This love of the people to microcredit, leading directly to the credit bondage, should not be too surprising. This loan can be obtained quickly, a set of documents required minimal credit history of the borrower no one checks. Equally surprising and the fact that many borrowers credit score that could not afford, and seriously worsened its already difficult financial situation (and in a good situation, these loans do not take, by definition).
On the microcredit market was (and to some extent still are), and other problems in addition to the above. For example, some organizations operate without a license or in violation of the law. Credit line - also known as microfinance institutions - dragged into their hell lot of Brits, and then began to beat out of them the debt methods, far from civilized. In this situation, the interest by the public authorities is only a matter of time.
State Office for the Control of compliance standards of conduct in the financial sector, or FCA, has reviewed, which revealed serious violations in the microcredit market. As in March, reported by the newspaper The Guardian, absolutely all audited companies were found "serious inconsistencies and unfair methods ", which, according to the FCA, led to" serious consequences for many consumers, "including financial losses. Were fined, companies had to pay compensation to its customers.
Some of the practices used were clearly recognized by FCA. These include very strict repayment options, the reluctance of free advice to consumers on repayment, the threat to consumers via SMS. One firm threatened to send employees to work or even home to the borrower for the proceedings to him.
Most firms considered giving "misleading and confusing" information about the possible consequences of missing payments. All companies were found errors in the calculation of the balance of payments and fees, usually unfavorable for the borrower side. Client will be the sum of wrong and erroneous time. The FCA noted that in some cases the situation was so deplorable that required "rapid intervention to prevent long-term risk to consumers."
FCA against microcredit?
This deplorable situation finally forced FCA action, not limited to only the checks and arbitrary imposition of a fine. In January 2015 came into force a set of new rules and regulations, and the situation began to gradually improve. Were introduced maximum interest rate and restrictions on commissions and payments, describes the requirements for quality of service. The new rules were so strict control, many microcredit organizations in the UK have started to simply close.
Prior to the entry into force of new rules, many media reported that microcredit living out its last days, because they will not be able to work in new conditions. We make bold predictions about the illegal businesses that close and make credit inaccessible to the population, to reduce the requirements for borrowers, high prices and other things that are supposedly market could not bear. However, after the introduction of the new rules it was months ago, but the market for microcredit is alive and feels fine.
So, Telegraph frighten its readers that the requirements FCA forced many companies to close down and it would lead to reduced competition and higher prices. In part, these predictions have come true, but only partly. Although some players could not exist in the new environment, the market as a whole was able to adapt and reorganize, so the new rules played an important positive role.
Under the new rules FCA, the interest rate on short-term loans can not be higher than 0.8% for the whole amount per day. In case of delay debt penalties can not exceed 15 pounds. The total amount of interest and fees may not exceed 100% of the original loan amount. This means that the borrower under what situation do not have to pay the lender more than double the amount of the loans.
If you repay the loan on time, the financial burden should be reasonable. Here, too, was introduced the corresponding limitation if borrow ? 100 for 30 days and pay it on time, the remuneration of the credit institution can not exceed 24 pounds.
"If a person is in trouble and can not repay the loan on time, the interest rate and penalties would no longer fly up to heaven. Neither the consumer no longer has to be a lender more than doubled the amount of down debt," - commented on the changes FCA Director Martin Whiteley (Martin Wheatley).
Microcredit is alive and well
As already mentioned, after the entry into force of the new rules FCA, many players have been forced to go out of business. However, for the most part it was precisely those companies that gave loans prohibitively high percentage and is generally irresponsible, therefore care has played a positive role, clearing the way for a more responsible and professional players. New firms did not (and could not) too bully prices by limiting rates and microcredit has therefore become more favorable for borrowers.
The prices even began to fall - fair lending firms have become seriously interested in attracting both new and old customers by the various activities and a high level of service. They began to lower prices and to simplify the procedure for obtaining and repayment of the loan. Improved consumer attitudes to microfinance institutions, improve its image in the society as a whole.
Experts noted the decline in claims and complaints of borrowers to credit institutions 50%. Today it is obvious that most of the players care about their reputation, tend to receive positive ratings in independent surveys, to acknowledge and correct their mistakes. All this contributes to improvement of the industry.
Decreased the number Also of illegal microfinance institutions and human rights of consumers. The new rules led to the FCA that the industry has become more fair and open. While many players out of the market because they could not be reconstructed and earn under the new requirements, new players began to work better and earn more.
You can say that the reduction in competition reduced choice for consumers, but the choice became healthier. It hardly needs to worry about the fact that the industry got rid of the crooks and swindlers.