New FCA Rules Coming for Payday Loan Comparison Sites
Payday Loan Lenders haven’t had a great year in 2015. The Financial Conduct Authority (FCA) who regulates the industry set price capping at the beginning of the year. This capping forced Closures and many leading firms switched their loans from monthly to instalment (hence chasing the profits). A new document published on October 28th 2015 alerts us to further change. However, this time around it is price comparison sites that show payday loan products that must roll out the changes. The key change will see the requirement of loan products being sorted by their lowest total cost. Other proposals include improved disclosure on pricing and enhanced search ability based on varying amounts and terms required.
Essentially, the objective is to protect the consumer, to balance out market competition and to directly target site owners who hand greater prominence to select companies for their financial gain. Lenders4U welcomes the proposed changes, although we won’t really be directly affected since we are not designed as a lead generation website. Those that are designed in that manner typically cherry pick the companies that they compare. They join X amount of affiliate/broker programs and then earn a commission for successful loan payouts (sometimes for basic leads with some brokers). They aren’t likely to list those with poor conversion rates or low payouts. The result of this is biased listings composed primarily to maximise earnings.
How are we different? Firstly, we don’t join partnerships and we don’t externally link to said companies. We don’t cherry pick, but instead aim to cover the entire market. We present the information and let you (the searcher) make your own mind up without showing any bias. Within our various comparison pages we list all lenders alphabetically and then at the bottom provide insights on who provides the lowest costs and who delivers the best features. Our monetisation strategy that enables us to pay the bills and continue operating is to display Google AdSense adverts. Google skims the content and shows matched advertisers. We have no control over who they show.
Our strategy may not be as financially rewarding, but our target is to build a comprehensive resource built to deliver value. We are being developed over the long term, rather than as a fly-by-night lead generation site often pushed with spam for short term gains. As the FCA has discussed, you commonly see target sites handing preferential treatment to select companies. Some confuse visitors by fusing brokers and lenders together and products aren’t often priced on the same borrowing examples. We are by no means attacking all payday loan comparison sites. Some of them provide real value, but we just feel personally that being impartial is the key ingredient to keeping the user best informed.
One point to raise with the FCA’s main proposal is that sorting payday loans by cost isn’t really any kind of fix on its own. You will find that the majority of monthly lenders today meet the lending cap (£24 per £100 over 30 days). This is why we’d recommend looking for other distinguishable features (added flexibility, weekend coverage etc). If pricing is key, then comparing longer term products makes sense where price matching is less commonly seen. On a final note, our comparison pages will be taking on a revamp soon. The layout isn’t going to change, but the plan will be to make the information more clear and detailed. Feel free to send your own suggestions.
View the Press Release