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Creditfix LB 03-2017

Number of Payday Loan Companies Falls

The number of payday loan companies has more than halved since the Financial Conduct Authority started overseeing the industry in 2014.

The financial regulator introduced caps on costs and fees, and rules to ensure that customers of the companies could no longer be required to pay back more than double the initial amount they had borrowed.

Due to these measures impacting on the potential profits of the payday lenders, many were forced to leave the market, bringing the total number of companies offering payday loans down from 400 when the FCA got involved to 144 by the end of 2016.

However, this number is still higher than was expected by the regulator.

The best-known payday loan company, Wonga, has now begun to offer short-term instalment loans, which are similar, but tend to be at lower interest rates and do not include the high fees and extra interest from rollovers.

Other subprime lenders such as Provident and NSF, who offer loan finance to consumers with low credit ratings, are also offering the instalment loans which are often known as home credit and normally sold in branches or by door to door agents.

Some of these lenders, such as Everyday Loans – part of NSF, are also now offering advice and tips on how customers can improve their credit rating.

Vanquis Bank, owned by Provident, will also offer a subprime credit card which lets customers increase the spending limit by showing their ability to stay within the limit.

Consumer problems related to payday loans has seen a drop of 45 per cent since 2014, according to Citizens Advice.

Chief Executive of Citizens Advice, Gillian Guy, would like to see further loan regulation, and commented: ‘We want the cap on interest rates and fees to be extended to other parts of the high-cost credit market to protect consumers

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