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Payday Loans
Payday Loans - UK
UK lenders must have a consumer credit licence, issued by the Office of Fair Trading (OFT)...
Payday loan lenders are relatively lightly regulated in the UK, at present, but some debt councillors and politicians are calling for stricter controls on payday loan lending to be introduced.
In order to trade legitimately in the UK, a payday loan provider
must obtain a consumer
credit licence, issued by the Office of Fair Trading (OFT).
Any advertising, whether online or using any other media, must display
the Annual
Percentage Rate (APR) that applies to the loan being offered.
If these basic rules are observed, almost any organisation can offer
payday loans. Unsurprisingly, a large number of companies have entered
the UK payday loans market, in recent years.
'Rolling over' of payday loans is permitted
in the UK, unlike the situation in some American states. In fact,
many firms have been accused of targeting customers who have major
financial difficulties, in order to continue to generate income
from them over long periods.
Payday Loans - US
Some states also restrict the number of loans that an individual can hold...
Payday loan lending is legal in 37 of the 50 states of the United
States. In those states where it is not permitted, the practice
is either banned outright or restricted by usury
laws that limit the highest rate of interest that can be charged,
making payday loans uneconomic for the lender. Some states also
restrict the number of loans that an individual can hold at any
given time in an attempt to reduce the risk of people falling into
ever greater debt.
Although, in the US, financial regulation is generally carried out at the state level rather than by the federal government, Congress has passed legislation to restrict the level of interest that can be charged to members of the armed forces. This resulted from concerns among senior officers that some lower paid military personnel were being targeted by unscrupulous payday loan companies.
Payday Loans - EU
EU member states guard their individual financial regulatory powers jealously...
When compared with the UK, the payday loan market in the rest of the EU is not as well developed. However, the payday loan sector is expanding rapidly, particularly in Poland and the Baltic States. Payday loan providers are also making major efforts to target Eastern Europeans working in Western Europe, as many of them are employed in low paid jobs which match the payday loan providers' preferred borrower profiles.
Some politicians have called for EU regulation of the payday loans
sector but legislation does not appear to be imminent. EU
member states guard their individual financial regulatory powers
jealously, so getting them to agree a common approach to payday
loan lending will not be a straightforward task.