On Tuesday 15th July the Financial Conduct Authority (FCA) announced plans to cap payday loan rates at 0.8% a day from January 2015 with a cap on default charges, which is likely to be set at £15.
Kristjan Novitski, founder of short term loan company, Peachy.co.uk says: “I was relieved when I found out the FCA’s plans earlier this morning. I think that the FCA has got it right this time. That kind of structure of the Cap will provide decent protection to the consumers whilst ensuring that the responsible lenders are able to carry on with their operations.
“However, in the same vein these new rules are going to put some payday loan companies under increased pressure which could in turn lead to their closure. Already we have seen around 30% of short term loan companies close down since the FCA took over and I believe this is only going to rise if a business can’t find itself to be making a profit.
“Since the FCA has taken over, everyone is getting a beating leaving them laying in their own blood and seeing if they can carry on or not, so that only the strong ones will survive.
“For us as a company we have evaluated the potential impact of the CPA and rollover limits introduced in July and it is worse than we expected and we have had to reduce our offering, change some of our products and not loan to consumers on such a short-term basis any more.
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“Capping the default fees at £15 does not really bother us. This will not impact on us greatly as already our default fees are capped at £12. Similarly, the proposal of creating a total cost cap of 100%, where if you borrow £100 you will only pay back a maximum of £200, is good news for the consumer and will not impact on us as already we freeze excess fees that are 45 days overdue so that the consumer doesn’t fall into great debt.”
Peachy is one of the first and only consumer finance companies who train all their staff on compliance in cooperation with FASEO – no matter their level or responsibility – about what is expected of them from the industry and the regulator, ensuring they keep the customer and legislation in their heart and minds at all times.
Peachy.co.uk is a trusted member of the Consumer Finance Association (CFA).