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Gocompare.com comments on the proposed cap on interest rates and fees for payday lenders

15 July 2014

Matt Sanders, Gocompare.com’s banking spokesman, said:

“From a customer’s point of view, these proposals are a positive step towards ensuring there’s an ultimate cap on the debt, which would limit the financial consequences of customers not meeting the loan repayments.

“The proposed affordability tests and limits should safeguard some of the most financially vulnerable customers from the spiral of debt we have previously seen in this industry. This is supported by the findings of the FCA’s survey of payday loan users, which found that average customers have lower income levels than the UK average, at just £16,500.

“I’d expect some lenders to pull out of this market if these new regulations are approved, however, the demand for short term borrowing will not disappear. It’s the high risks which potentially make this unfeasible for the lenders.

“Payday lenders operate in a high risk, sub-prime market where a return is far from guaranteed.  There’s an argument that by making their lending criteria more robust they’ll filter out some of those potential losses, however, they are intrinsic to the payday loan industry.”