All the talk in the short term loan industry at the moment are the caps being introduced on payday loans. it is predicted that there will only be 4 main lenders left after all the terms that are being imposed by the Financial Conduct Authority have been implemented.
In the news the crackdown is welcomed by some, but others say that it will lead borrowers to the black market and to lenders that aren’t in any way regulated and who lend money illegally. We believe that this may be the case for a few borrowers, but the majority will probably find loans elsewhere in the short term market. Lenders such as Varooma who are one of the main logbook lenders have already stated that they hope that because of this regulation, people will move more towards logbook loans because they are similar to payday loans but are taken out over a longer period and have lower interest rates.
Criticism of logbook loans
Logbook loans have themselves faced some criticism in recent years due to the hard sell that some companies have used as well as the excessive charges lenders have levied on customers when they haven’t paid their debts. There are even campaigns against logbook loan companies because of the way that they repossess cars even when the owner hasn’t taken out a loan. This occurs when someone takes out a loan against a vehicle and then sells it to someone else with the loan still attached to it.
When the Financial Conduct Authority was first given the task of regulating the short term loan industry they would have wanted to tackle payday loans first in order to make a big splash so that companies took notice and consumers felt more secure. With the moves they have made so far in that industry it seems that has worked. Logbook loan companies and Guarantor loan companies may feel that they are in the right place to take the custom payday lenders have lost, but it will only probably be a matter of time before they face similar scrutiny themselves, it might just be that this scrutiny is not as publicised as payday lending.
Whether or not logbook loans can take the custom of payday loans remains to be seen. From afar it seems that they might be in a good position to do so but it isn’t until all the waves of regulation have been passed that we will be able to see how the land lies. It might be that short term lending is severely restricted in all it’s forms and the people who campaign against such strong restriction find that what they say is correct and borrowers who are desperate for money move to the black market.