Sep 27, 2013 Simon Williams
At this point, we all know that the situation in the Untied States regarding short term lending is contentious, to say the least. The state government of New York is waging a war against many online lending companies, most of them operating on Native American - and therefore protected - land. This means that they don't have to abide by state laws, only federal, putting Governor Andrew Cuomo and Superintendent of Financial Services Benjamin Lawsky on very shaky legal ground.
Aside from the court fight that's brewing between these parties, the situation has put a lot of American lenders on the defensive, ready to explain that most of their clients know the terms and regulations before they borrow, meaning these companies aren't taking advantage of anyone, just helping them.
Interestingly, it's a similar situation overseas. While there aren't any local governments launching a virtual war against the industry like in the United States, the sector in the United Kingdom faces some adversity. A number of British lenders have taken action or are making statements to show not only consumers, but critics, that they present a legitimate and helpful service. After all, these businesses were so helpful during the global fiscal crisis, but now that the economy is picking back up, they're no less effective at getting people the access to alternative finance they need.
Making all of the terms understandable
Many in the short term lending industry think there's one major element that's portraying the businesses as unfair and financially irresponsible - the annual percentage rates (APRs). The issue is that, when compounded, these metrics seem huge. However, because the loans are never meant to be taken out for more than a couple of months at most, these numbers are often off putting and very misleading.
The Daily Mail reported that a number of big players in the industry in the U.K., such as Wonga and QuickQuid, are taking umbrage with this and calling on regulators to foster change. The news source said that they face unfair criticism because of this statistic alone, and they don't want to include this information in some of the associated advertising campaigns. However, that's currently mandated by a British trade body.
This also comes after a Consumer Finance Association (CFA) survey revealed that British borrowers of all ages are confused by APRs, the news outlet detailed.
'We need to level the playing field and ensure all providers of all types of credit quote APRs and, more importantly, require all providers to tell customers the full cost of their loan in pounds and pence," CFA Chief Executive Russell Hamblin-Boone told the Daily Mail. "No one ever pays back thousands of per cent in interest on a short-term loan. Quite simply, the average charge is £25 per £100 borrowed."
Lenders dedicate employees to education
According to Mortgage Introducer, lenders all over the nation are making moves to educate consumers about the true nature of the industry. For instance, Shawbrook Bank's short term lending branch recently designated a team of workers who will do nothing else but help consumers who come in looking for alternative finance options.
The news source specified that these teams will be made up of four members - a lending officer and three lending managers. Not only can these individuals properly explain the terms and conditions, but they will be able to complete a faster turnaround. This can also have long-lasting, positive effects on the industry - if consumers know that they will be able to access fast cash, they may be more likely to seek out these resources when they need financial help.