Bad Credit Payday Loans: Are Lenders More Selective in 2015?

Q: I have just been declined for a loan. Are bad credit payday loans lenders more picky in 2015? (shortened for title) ~ Don, Liverpool.

Are bad credit payday loans still available across the market or have the providers now restricted their lending decisions? The reason behind a shift stems around the FCA cap (Info) that had to be adhered to from the 2nd January onwards. At the forced 0.8% daily rate, every monthly lender can now charge no more than £24 per £100 over 30 days. Since this is a daily rate there is no loophole for competing lenders to get around. This has been seen in many states across America whereby their caps are commonly fixed over a complete month and so the firms just charge the full sum even if the customer is paid in 2 weeks.

Short term firms like Wonga have been notably hit by this new regulation. They can now only charge £5.60 per £100 over the period of 7 days. They used to require £5.50 itself for their transmission fee alone. Whilst Faster Payments are free in personal banking, businesses have to pay to initiate them that is why they used to ask for an extra fee of £5 or £6. CHAPS payments are certainly now a thing of the past. These can cost up to £30 for a single transfer to be processed. There were other cap rules introduced with these generally supporting a borrower should they run into problems.

When you factor in this industry’s high default rates you get a clear picture of just how difficult it is to turn a profit. It is this very reason why the availability of bad credit payday loans is being questioned. I would hedge my bet that they have become much more selective in their risk assessment protocols. This happened with the banks after the crisis that is one of the central reasons why these subprime products boomed in the first place. Incidentally, some banks are charging considerable more than 1% per day for their overdraft usage and unauthorised borrowing can trigger some of the most excessive rates in the industry.

Whilst the FCA has been known to send out huge fines for major banks, there is no doubt that they have had a lucky escape when it comes to short term borrowing. Whilst bad credit payday loans may be less likely to obtain in 2015, the various Instalment and 12 Month Loan lenders haven’t had to make any changes to their eligibility requirements. These weren’t hurt by price capping since the costs over long terms sit way below the new limit anyway. With a poor score there are still plenty of choices in other subprime markets that also won’t have had to adapt whether that be doorstep, guarantor or logbook loans.

This is also the case when it comes to subprime card providers such as Aqua, Capital One and Vanquis. Whilst on this page we have highlighted that Monthly Lenders are likely to have become more selective now, this doesn’t mean that they would have pulled down their overly promotional claims. Even if they can’t lend to you directly, many of them can just push your application on to third parties and collect a commission in doing this. Then there are the brokers that will continue to focus on collecting leads by promising high acceptance rates. Behind the scenes though there is no doubt that many direct lenders have tightened their belts.