Payday Loan Caps May be Helping Loan Sharks

In 2014, the Financial Conduct Authority (FCA) went all in when it came to reining in the payday loan industry and imposing new rules, regulations and practices. This initiative was meant to ensure consumer protections were in place and to shield the most vulnerable and low-income households from being taken advantage of. It was a success as a majority of loan applications were rejected last year.

At the time, however, the payday loan industry warned that any new stringent measures would prompt impoverished and desperate consumers turn to the unregulated side of the industry: loan sharks.

Most people who were in favor of installing new rules and regulations scoffed at the notion, and dismissed it as fear mongering in order for the Alaska payday loans industry in the United States to operate in a sort of wild west.

But new reports suggest that the payday loan representatives may have been right after all.

The British financial watchdog has initiated a review in order to determine if capped interest rates on payday loans are driving consumers into borrowing funds from unregulated and illegal loan sharks.

Officials concur that the cap has provided major improvements for consumers because they will not be required to pay back more than double the amount borrowed. This also means that Britons will not be involved in a debt trap, and the numbers show that fewer are falling into arrears because of these caps in place.

What about the consumers who were unable to get short-term loans? Where did they go to for money?

“We have to be careful that we do not create a market which encourages illegal lending,” FCA Chief Executive Andrew Bailey said in a blog for MoneySavingExpert.com, a consumer campaign body. “Going to illegal money lenders, or loan sharks, means that you are not protected if you find yourself unable to pay.”

Moreover, it isn’t just payday loans that have fallen under the consumer watchdog’s microscope. The agency is also looking at catalog credit, rent-to-own lending, guarantor loans and pawn brokers. In addition, financial institutions are being scrutinized as part of the FCA’s latest investigation as well.

“The FCA will look in more detail at overdrafts from a consumer protection as well as a competition perspective, using its full range of powers,” the FCA said.

In the meantime, payday loan businesses will generate the greatest amount of scrutiny. With nearly one million fewer consumers being approved for payday loans and 40 percent of lenders leaving the market altogether, the researchers will attempt to find out just where exactly they have turned to for their pecuniary needs.

Ultimately, if they have utilized loan sharks then this would be the unintended consequence that so many people, both analysts and trade representatives, warned about prior to the regulations.

A similar argument is happening in North America so the results of the FCA’s investigations may provide some officials a great deal of evidence to give pause and reexamine their numerous proposals to stop payday lenders from operating in cities or restricting their expansion plans.

The organization’s findings will be published in the middle of next year.

Theresa May Promises To Reveal Brexit Plan Details Soon

The Brexit vote in June has taken the world by storm. Britain’s decision to leave the European Union has repercussions all over the world. The tension continued to increase as the Prime Minister Theresa May had no clear plans about Brexit negotiations. However, she has promised that there will be more clarity regarding the Brexit plan and it will be shared during her speech later this month.

After the people of UK voted in favor of Britain leaving the European Union, the Article 50 of the Lisbon Treaty must be formally invoked to commence the negotiations with Brussels regarding leaving the European Union. Theresa May is expected to reveal the Brexit plans in a speech at least two months prior to this move. The Supreme Court now has to determine whether the Parliament can have an opinion on the invocation of the Article 50. It is expected that the Supreme Court will rule against the government, emphasizing that Parliament should be given some power. The officials from both the houses believe that the lawmakers won’t be against the result of the Brexit referendum.

Theresa May is facing a major burden that has not been experienced before. There is bitterness in the country and in the government regarding the whole Brexit referendum. The Prime Minister had been elusive on this topic so far because she fears that Britain will lose its power when the details of the Brexit negotiations are known to Brussels before the formal process. Her speech and the details it reveals will have a major impact both inside and outside the country.

Ivan Rogers, Ambassador of Britain to the European Union resigned suddenly to everyone’s amusement. In a rather bitter email to his staff, he expressed his anguish about the government’s muddled thinking. He said that the government has not considered the opinions of other 27 nations in the bloc regarding the Brexit negotiation. Mr. Rogers was a close associate of the former Prime Minister David Cameron who failed in his attempt to form a new arrangement between Brussels and Britain. Mr. Rogers’ opinion did not sit well with the political advisers Nick Timothy and Fiona Hill. The opinions of Mr. Rogers notoriously presented itself to the public’s eye. He was seen condemning the government for its unpreparedness and optimism regarding striking a positive deal.

The media had a field day discussing the efficiency of May’s leadership and the apparent loss of Mr. Rogers. However, those who are in favor of Brexit were happy as they felt that Rogers’ quitting decision is inevitable in the present scenario. David Davis, head of Department of Exiting the EU tried to downgrade the power of the ambassador. However, his efforts were thwarted and Tim Barrow is now appointed as the ambassador. The plans of Theresa May are under extreme scrutiny because she herself is an opponent of Brexit but she has promised to fulfill the wishes of the British people.

Britain hopes to create a new trade deal associated with goods and services and a transitional deal to allow Britain to preserve the free trade. If Britain loses access to the single market, it can affect its integrity in many ways.