Over the Years the Payday Loan Industry and What Has Changed. The high cost credit industry has changed dramatically in recent years, since its inception in the 2000s, during a time of changing economic fortunes, it has recently changed its face.

The rise and fall of high cost loans

In the span of a decade, we have witnessed the growing popularity of payday loans in UK. Shortly after the financial recession and crash of 2008, then a public wage freeze in 2010, followed by a restriction on lending by the big banks soon after. All of this has led to a boom in the industry and the emergence of more websites than ever before.

The field of payday loans grew dramatically around this time. Before 2009, just under 250,000 UK residents took out a payday loan each year. Go forward just 3 years to 2013 and that number has grown to 1.8 million people a year that UK payday lenders lend to. Make over 2.2 billion subprime loans per year.
However, this did not last and the industry has experienced a downturn in recent years. Several factors have affected the industry in a negative way, causing a decline and alteration of what was once a bustling area.

New FCA regulations

One of the reasons the industry has declined so much is due to new rules implemented by the Financial Conduct Authority. It started in 2015 and was an industry-wide crackdown on the quick and wild lending models established by some lenders. He set clearer rules and they stood as market regulators for better lending practices.
The new rules introduced by the FCA were aimed at limiting the number of payday loans a person could take out at a time, the number of times a loan could be renewed, and to introduce a stricter loan code on websites. payday loans. Including accessibility checks and mandatory warnings on all websites offering the service.
This caused a stir across the UK and saw the exit of some major players in the industry. Recently, Quick Quid, Wonga and The Money Shop all entered into management. This follows a flood of payday loan repayment requests from customers who said they were unfairly sold for a payday loan. Wonga paid over £ 400million before going bankrupt.

Payday loan claims

This is a new area that arose in the wake of the 2015 cleanup. It turned out that some lenders treated clients unfairly and misused loans to them. Major lenders were taken to task and a new payday loan compensation business began to exist.

Alternatives on the market

While industry downsizing will likely result in fewer and fewer companies before eventually solidifying into a handful operating in this field. There is a growing market of alternative lenders and apps that have grown in the face of payday loans.
These range from 6 to 24 month longer repayment products, helping clients avoid the payday loan debt cycle, if that was previously an issue. New FinTech companies offering high cost credit solutions.

These new apps range from WageStream, a financial app to help staff with wages before they’re paid, to Neyber, a workplace financial tool for employees.

The future of payday loan

The concept of payday loans has never been accepted by tech start-ups, so it is hoped that this is where new models and innovations in short-term lending will come in the next few years. The face of the market is changing and will continue to change with the help of Silicon Valley to push FinTech to the next point of growth.