The short term loan market needed regulation a long time before the Financial Conduct Authority (FCA) stepped in. For example there is currently a campaign running against logbook loans to raise awareness of the dangers of that type of finance and highlighting why the law should be changed to make it more difficult for people to be able to sell a car on with a loan attached to it. With no authority overseeing the market it was quite easy for lenders to charge hidden fees, not be upfront about what their fees actually were, and to use aggressive tactics when it came to collecting debts.
The same became true for other types of short term lending, which became incredibly easy to obtain with the rise of the internet and the ease of applying online. Even with regulation it will still be very easy to apply for a loan with a high interest rate and receive the money on the same day.
One of the main benefits of regulation is that the FCA has to authorise all companies that offer short term loans to consumers. If the companies don’t meet the FCA’s requirements they will suffer serious sanctions, which could include being forced to cease trading. Having this threat over them will force many of these businesses to change the way they do business in order to comply.
Regulation means that consumers will be safer when applying for and using loans. Consumers may not necessarily realise that anything has changed when they first apply for a loan, but there will be a difference in the way that the loan is handled by the company.
Loan regulation has been due
It is hard to believe that the industry carried on for so long without outside regulation. It wasn’t until things became so bad that there had to be a change by the government to make sure that more consumers didn’t suffer at the hands of certain businesses.