One of the most grievous charges payday lenders charge to their customers may be on its way out, if the FCA follows through on a proposed regulation. The FCA has been cracking down on payday loans for a long time now, and there have been talks recently, according to BBC.com that unarranged overdraft charges are going to be targeted next.
These are charges that have not been approved by the borrower but are still perfectly legal. They are charges that are made in accordance with the lender’s agreement with their client, but many times, they are charged without the expressed consent of the borrower. Payday lenders make quite a bit of money with these unexpected charges, but their customers hate them.
Some of the largest lenders in the UK have already gotten rid of unarranged overdraft charges entirely. This is a move to position themselves as a customer friendly service and to get ahead of the possible incoming regulation. Lenders like Lloyds are making that move and appealing to customers by being more forward with their services and methods of operations. Customers appreciate lenders that treat them with respect and always ask before making a charge, but pretty soon, it could become mandatory that they operate this way.
The FCA has made at clear that it has no intention of keeping up the status quo for the high-interest lending market. The organization as a whole has continued to move legislation forward time and again as it enacts stricter rules for the industry. This is an industry that has come under repeated fire in the past for unscrupulous practices and methods of operation that are at odds with the best interests of consumers, and the FCA has made it its duty to crack down on his practices and to ensure a more customer friendly payday loan industry.
One of the biggest problems with unarranged overdraft fees is not that they are unarranged but that they are so much more expensive than payday loans, in many cases. These charges can completely derail a borrower’s repayment plan and make it very difficult for them to ever fully pay off the loan. This keeps them in debt to the lender for far longer than they anticipated, and that’s the kind of thing that the FCA is trying to prevent. Payday loans have long been seen as a trap for the financially unstable, and by targeting unarranged overdraft charges, the FCA hopes to get rid of some that stigma and make the industry safer for consumers.
They have been working hard to eliminate debt traps, and each new legislation they enforce seems to be geared toward that end. Most banks will alert their customers about overdraft fees visa email or text message, but it is not something that all payday loan companies or their customers, and the FCA may be working to change that in the near future.