Nov 17, 2013 Simon Williams
The short term lending industry has been subject to a lot of scrutiny in the United Kingdom recently. Members of Parliament (MPs) have been taking a closer look at the goings-on in the sector, sometimes at the behest of high street banks, other lenders and consumer groups, many of which call for severe regulations or the shutdown of the entire industry.
This is a far cry from the situation just a few years ago when the global recession was kicking into high gear. Then, there was mostly radio silence from these parties, as they shut their doors to anyone who wanted or needed to borrow money but didn't have a perfect consumer credit score. But, the issue today is that not a lot has changed. Sure, the British economy is becoming more robust day by day, but it is far from strong and many people continue to struggle to make ends meet.
This had led big players in the alternative finance industry to rise up and defend both themselves and their clients. Explaining their value to MPs, defending their strategies and noting how they continue to provide an important - even critical - service might be what government leaders need to back off and let companies do their thing.
Lenders defend practices
According to the BBC, a number of short term lending leaders recently met with Parliament's Business Select Committee to discuss the state of the sector. During this session, the professionals were quizzed about tactics and allowed to defend their actions.
For instance, the news source said that though many critics say borrowers of short term loans often complain about their experiences and dig themselves into financial holes that are hard to get out, concrete evidence suggests otherwise. Representatives from popular lending companies Wonga and Mr Lender told MPs that only between 2 and 3 percent of borrowers face fiscal hardships after taking out the loan. Moreover, Consumer Credit Trade Association Chief Executive Greg Stevens noted in the session that only 36 complaints had been recorded by the regulatory body thus far this year.
Wonga's Henry Raine told MPs that his company goes above and beyond to help customers, and that Wonga's product is often a better option than what credit card firms and banks offer.
Are more sessions to come?
The Belfast Telegraph suggested that these sorts of meetings might become commonplace, as individuals and groups who take umbrage with the industry no longer make public statements or attempt to speak directly to lending leaders to devise solutions that work for everyone - they go right to MPs now.
Recently, the newspaper indicated that after the session during which the professionals were quizzed, some financial experts questioned short term lenders' advertising tactics. This might have been a more pertinent point to bring up before the Parliament meeting, so it could have been addressed. As such, it might not be surprising if future sessions are called.
This might be a good thing in order for short term lenders to defend themselves and further ensure they're allowed to continue to offer a valuable service to the British public.