Personal debt crisis

[hibsbollah]

http://www.bbc.co.uk/news/uk-16063271

4 million people will take out a payday loan over the next two months. quikquids APR is over 1700%. According to debt management helplines one third of these loans are not paid off immediately, and make an individual's financial problems worse.

Its crazy there seems to be no regulation in this market at all.

[lapsedhibee]

http://www.bbc.co.uk/news/uk-16063271

4 million people will take out a payday loan over the next two months. quikquids APR is over 1700%. According to debt management helplines one third of these loans are not paid off immediately, and make an individual's financial problems worse.

Its crazy there seems to be no regulation in this market at all.

And some of the loans will not be paid off at all, in which case what'll happen - as has already happened aplenty during the banking crisis - is that responsible people - ie those who don't spend money which doesn't exist on Christmas tralala - will subsidise irresponsible people. The responsibles have already subsidised banks for the irresponsibles, and will do the same for however long inflation/quantitative easing lasts.

Bah Hamburg.

[Killiehibbie]

Simple solution. Don't spend money you haven't got.

[GlesgaeHibby]

I realise times are tight and many people are short of cash at this time of year, but to take a loan from a payday loan company is madness. It makes me angry to see these companies being advertised on TV knowing that there will be people gullible enough to take out a loan and let these sharks make a fortune out of their financial plight. As the OP said there needs to be tighter regulation of these companies because they exist purely to fleece those in desparation.

The mess we are in just now was due to both governments and people borrowing money they didn't have to fuel economic growth and to buy things we desired. That system is broken. People need to realise that we cannot live outwith our means, both at a national and personal level.

[IWasThere2016]

http://www.bbc.co.uk/news/uk-16063271

4 million people will take out a payday loan over the next two months. quikquids APR is over 1700%. According to debt management helplines one third of these loans are not paid off immediately, and make an individual's financial problems worse.

Its crazy there seems to be no regulation in this market at all.

Yup - some of the rates charged are immoral.

[Calvin]

Absolutely, tighter regulation of these glorified loan sharks is a must; but let's not forget that the APR of an unauthorised overdraft from an established high street bank, think it was Santander, can hit 819000% APR!

[bingo70]

I've not got a lot of sympathy here, as someone who ran up a lot of debt in the past that i was unable to pay i appreciate now that if i want to borrow money now it'll cost me more than someone who has paid their bills on time and the people who are getting these loans at ridiculous rates have a history of not paying money back on time like they're supposed to, which is why they get the massive rates.

Bit of personal responsibility needed here instead of folk borrowing money they can't afford to pay back knowing fine well what the apr is before but still blaming the loan companies.


Also remember hearing one of the founders of these companies complaining about having to put APR on the adverts as it's not a loan thats not meant to be paid back annually, i know when i was struggling if i had got one of these loans instead of using 'an unauthorised overdraft' from Lloyds bank i would have been cheaper, although in fairness i think Lloyds have now lowered there charges.

[bingo70]

Yup - some of the rates charged are immoral.

So is borrowing money you know you can't afford to pay back which is why they either got in this situation or why they don't pay these companies back on time and end up paying the ridiculous rates.

[hibsbollah]

So is borrowing money you know you can't afford to pay back which is why they either got in this situation or why they don't pay these companies back on time and end up paying the ridiculous rates. Its not enough just to say 'personal responsibility, end of'. Lots of people are struggling in the recession and will be tempted by wonga, quikquid and the rest. Yes, constant conspicuous consumption is a bad thing but you cant expect cultural habits that have beenencouraged since the 80s to disappear overnight. 4 million people arent all irresponsible. Lenders behaviour needs to be regulated to change the overall debt culture. An APR cap of 30% please Mr Cameron.

[bingo70]

Its not enough just to say 'personal responsibility, end of'. Lots of people are struggling in the recession and will be tempted by wonga, quikquid and the rest. Yes, constant conspicuous consumption is a bad thing but you cant expect cultural habits that have beenencouraged since the 80s to disappear overnight. 4 million people arent all irresponsible. Lenders behaviour needs to be regulated to change the overall debt culture. An APR cap of 30% please Mr Cameron.

There's probably a balance to be had as you definately have a point, i just think however these companies aren't forcing anyone to take their money and people go in with their eyes open knowing full well what it'll cost but then only seem to complain when it comes to paying it back and as these are people that have ruined their credit history by having a history of doing this with other more reputable companies i don't blame the likes of wonga for putting massive rates on as they're giving it to people that aren't likely to pay it back, hence the high rates they get so if there was a 30% limit companies like the one in question just wouldn't run as it would run at a huge loss and i can't see the goverment forcing businesses to close in order to cater for people that won't pay back what they're supposed to.

i work in collections for a bank and we're actually very reasonable to people who can't or won't pay and all i hear all day is how it's not their fault, it's the recession or it's this or that but it's never their fault, although i think you have a point about the goverment doing more to stop tempting people into borrowing i also think more emphasis should be put onto people borrowing less and taking responsibility for what they borrow.

[RyeSloan]

Its not enough just to say 'personal responsibility, end of'. Lots of people are struggling in the recession and will be tempted by wonga, quikquid and the rest. Yes, constant conspicuous consumption is a bad thing but you cant expect cultural habits that have beenencouraged since the 80s to disappear overnight. 4 million people arent all irresponsible. Lenders behaviour needs to be regulated to change the overall debt culture. An APR cap of 30% please Mr Cameron.

So it's now government responsibility to cap loan rates :confused:

I'm sure you already know that these rates are high for two reasons:

1) They are designed as short term loans
2) They are high risk for the lender so high rates are required to offset the bad debt.

Sure regulate the marketing to ensure the required information is given in a clear and understandable way but capping the APR will only drive the industry back underground and I can assure you door to door money lenders often end up inflicting much more damage on peoples lives than just a high APR.

[PeeJay]

i work in collections for a bank and we're actually very reasonable to people who can't or won't pay ...

I wonder if banks really are so reasonable? They do earn a great deal of money on people who default, surely?


You're right about personal responsibility, of course!

[lapsedhibee]

Its not enough just to say 'personal responsibility, end of'. Lots of people are struggling in the recession and will be tempted by wonga, quikquid and the rest. Yes, constant conspicuous consumption is a bad thing but you cant expect cultural habits that have beenencouraged since the 80s to disappear overnight. 4 million people arent all irresponsible. Lenders behaviour needs to be regulated to change the overall debt culture. An APR cap of 30% please Mr Cameron.

Oh Yes They Are. Not just them - plenty others besides, including government ministers with Scottish, Presbyterian backgrounds - but every one of them, certainly.

[Green Mikey]

I wonder if banks really are so reasonable? They do earn a great deal of money on people who default, surely?You're right about personal responsibility, of course!

Banks lose money when someone defaults because the money that has been leant out is not being paid back.

I think that a mix of personal responsibilty and education is the key to stopping people becoming unduly indebted by payday loans. People who use these services need to understand what they are and the consequences of using them.

[hibsbollah]

So it's now government responsibility to cap loan rates :confused:I'm sure you already know that these rates are high for two reasons:1) They are designed as short term loans2) They are high risk for the lender so high rates are required to offset the bad debt.Sure regulate the marketing to ensure the required information is given in a clear and understandable way but capping the APR will only drive the industry back underground and I can assure you door to door money lenders often end up inflicting much more damage on peoples lives than just a high APR.The Government has all the tools at its disposal already in the form of the OFT and the Financial Services Authority. All you need is new legislation, which would be popular politically i would imagine and could help to alleviate personal debt and associated social problems that the recent report has highlighted. It doesnt seem unreasonable to say to responsible lenders that there should be a ceiling beyond which interest rates shouldnt go. Whats the alternative? If short term loans are such a 'high risk' to the lender that they need to charge a 1700% APR, they shouldnt offer them. Its a scam, pure and simple.

[Leicester Fan]

I've read the article and I can't see where it mentions 4million.

Also this article seems to based on little more than guess work.

Millions of Britons are likely to take out a high-interest loan in the next six months to last them until payday, a group of insolvency experts claims.
R3, which represents "professionals working with financially troubled individuals and businesses", bases its claim on interviews with 2,000 people.
John Lamidey, of the Consumer Finance Association, which represents payday loan companies, disputed the figures.

[hibsbollah]

http://m.guardian.co.uk/ms/p/gnm/op/sij4eyZn_8jkvCjXKLz_Tng/view.m?id=15&gid=money/2011/dec/07/payday-loan-companies-tougher-regulation&cat=top-stories

The link to the G3 report is above. It seems quite robust with a normal sample size. The 4 million figure i heard on the today programme this morning, although 3.5million is mentioned in the Guardian report above. Whatever, its a frightening figure, taking into account 32% of people who take out the loan WILL default on it and start incurring these eyewatering charges.

[Pete]

So it's now government responsibility to cap loan rates :confused:

I'm sure you already know that these rates are high for two reasons:

1) They are designed as short term loans
2) They are high risk for the lender so high rates are required to offset the bad debt.

Sure regulate the marketing to ensure the required information is given in a clear and understandable way but capping the APR will only drive the industry back underground and I can assure you door to door money lenders often end up inflicting much more damage on peoples lives than just a high APR.


I think it's disgusting that we live in a world where we consider this acceptable.

The worse off are charged more for money than those who can easily afford it...just in case you cant afford it!

The rich get cheap rates while the poor get expensive rates...and people wonder why they ***in default!

[lapsedhibee]

I think it's disgusting that we live in a world where we consider this acceptable.

The worse off are charged more for money than those who can easily afford it...just in case you cant afford it!

The rich get cheap rates while the poor get expensive rates...and people wonder why they ***in default!

Think there's a possibility here that you're confusing or even equating "poor" with "irresponsible".

[hibsbollah]

Think there's a possibility here that you're confusing or even equating "poor" with "irresponsible". Why dont the rich use high interest loans? Is it because theyre all 'responsible' or could it maybe be that banks like to lend to the rich?

[lapsedhibee]

Why dont the rich use high interest loans? Is it because theyre all 'responsible' or could it maybe be that banks like to lend to the rich?

No, the rich are not all responsible. That's the point I'm arguing. Rich does not equal responsible, nor poor irresponsible.

In general, payday loans etc are the province of people who either are or have been irresponsible with money. There are plenty of relatively poor people who wouldn't go anywhere near such loans.

Banks if they're run correctly like to lend to people who're going to pay them back. When they foolishly started lending to people who were never likely to pay them back (see subprime mortgages), a bit of trouble ensued.

[hibsbollah]

No, the rich are not all responsible. That's the point I'm arguing. Rich does not equal responsible, nor poor irresponsible. In general, payday loans etc are the province of people who either are or have been irresponsible with money. There are plenty of relatively poor people who wouldn't go anywhere near such loans. Banks if they're run correctly like to lend to people who're going to pay them back. When they foolishly started lending to people who were never likely to pay them back (see subprime mortgages), a bit of trouble ensued.I agree with most of that. However, those on low incomes will use payday loans far more than those on high incomes, regardless of how you define 'responsibility'.

[lapsedhibee]

those on low incomes will use payday loans far more than those on high incomes, regardless of how you define 'responsibility'.

And I agree with that. But I think that to the extent that people on low incomes are trying to emulate people on high incomes, without having the high incomes (which is where I think much of the need for eg payday borrowing comes from), they're being irresponsible. Have been encouraged to be irresponsible, no doubt, for the last couple decades by other people who should have known better. The (admittedly very small and statistically insignificant) number of people I've spoken to who've made use of 'emergency' loan facilities have been in my view curiously reluctant to solve what I consider to be their own money management problems by cutting down on Sky TV, mobile phone contracts, and other tralala outgoings. Stop spending money that you don't have/doesn't exist!! :grr:

[Betty Boop]

And I agree with that. But I think that to the extent that people on low incomes are trying to emulate people on high incomes, without having the high incomes (which is where I think much of the need for eg payday borrowing comes from), they're being irresponsible. Have been encouraged to be irresponsible, no doubt, for the last couple decades by other people who should have known better. The (admittedly very small and statistically insignificant) number of people I've spoken to who've made use of 'emergency' loan facilities have been in my view curiously reluctant to solve what I consider to be their own money management problems by cutting down on Sky TV, mobile phone contracts, and other tralala outgoings. Stop spending money that you don't have/doesn't exist!! :grr:

:greengrin

[Pretty Boy]

And I agree with that. But I think that to the extent that people on low incomes are trying to emulate people on high incomes, without having the high incomes (which is where I think much of the need for eg payday borrowing comes from), they're being irresponsible. Have been encouraged to be irresponsible, no doubt, for the last couple decades by other people who should have known better. The (admittedly very small and statistically insignificant) number of people I've spoken to who've made use of 'emergency' loan facilities have been in my view curiously reluctant to solve what I consider to be their own money management problems by cutting down on Sky TV, mobile phone contracts, and other tralala outgoings. Stop spending money that you don't have/doesn't exist!! :grr:

Whilst I don't disagree people need to show more personal responsibility, the current job market and economic climate means a lot of people who could once afford 'tralala' outgoings no longer can.

That's certainly the position I found myself in. I had a very good job that paid enough to keep me comfortable. I had a nice rented flat, mobile phone contract, sky tv, money going into saving and a private pension, credit card, enjoyed a couple of holidays a year etc. Unfortunately I was made redundant, because I'd only been in the job a relatively short time I got a piss poor pay off. I was unable to find work at a similar level and now earn far less than 50% of what i previously did.

I cut back very quickly, got rid of non essentials etc but without my savings I could have been in bother and even now any sudden outgoing could leave me in trouble. I had taken on financial responsibilities that I could comfortably manage at the time, I had no inclination my circumstances would change suddenly. I'm sure there are other people in a similar situation. Everyone who is struggling financially at the moment isn't an irresponsible spender who's brought it on themselves.

[lapsedhibee]

I cut back very quickly, got rid of non essentials etc but without my savings I could have been in bother and even now any sudden outgoing could leave me in trouble. I had taken on financial responsibilities that I could comfortably manage at the time, I had no inclination my circumstances would change suddenly. I'm sure there are other people in a similar situation. Everyone who is struggling financially at the moment isn't an irresponsible spender who's brought it on themselves.

Agree with that, but note that you mention your savings. Responsible people, while they are high earners, stuff a bit away for when they are not. Even squirrels know this. How much or how little you stuff away is, I would argue, a decent guide to how responsible you are.

[Speedy]

Whilst I don't disagree people need to show more personal responsibility, the current job market and economic climate means a lot of people who could once afford 'tralala' outgoings no longer can.

That's certainly the position I found myself in. I had a very good job that paid enough to keep me comfortable. I had a nice rented flat, mobile phone contract, sky tv, money going into saving and a private pension, credit card, enjoyed a couple of holidays a year etc. Unfortunately I was made redundant, because I'd only been in the job a relatively short time I got a piss poor pay off. I was unable to find work at a similar level and now earn far less than 50% of what i previously did.

I cut back very quickly, got rid of non essentials etc but without my savings I could have been in bother and even now any sudden outgoing could leave me in trouble. I had taken on financial responsibilities that I could comfortably manage at the time, I had no inclination my circumstances would change suddenly. I'm sure there are other people in a similar situation. Everyone who is struggling financially at the moment isn't an irresponsible spender who's brought it on themselves.

Obviously not everyone is but if you are in a situation that you are using payday loans then you are buying something that you can't afford and I'd guess that the vast majority are in that position because of irresponsible spending. If you were using it for something that you genuinely needed e.g. not christmas presents or designer jackets then there would likely to be some sort of government benefit available.

(The other exception would be if you are using them as a one off on a limited time purchase and and are prepared to, and can afford to, pay the premium but I would imagine that is rare).

[RyeSloan]

I think it's disgusting that we live in a world where we consider this acceptable.

The worse off are charged more for money than those who can easily afford it...just in case you cant afford it!

The rich get cheap rates while the poor get expensive rates...and people wonder why they ***in default!


It's nothing to do with Rich or Poor but all about risk of default..the higher the risk the higher the interest rate...why do you consider that so disgusting?