The online direct pay day lenders that are currently operating are becoming a slight issue for the average person. I have been seeing a few lenders (many of them being big banks) treating their customers very poorly, and it is important that these companies – or at the very least the terms that the companies offer – are detrimental to the customers rather than being there to service and help those customers.
A large one in the United Kingdom is specifically known for putting people into payday loan cycles, ruining their lives and financially digging them into a hole that they cannot get out of. That is a seriously difficult issue. This should be regulated heavily, but because pay day loans are generally a new loan format, there is not a lot that can be done until the cycle becomes a national issue.
There are multiple companies that offer pay day loans, but the big issue that gets people into such financial ruin is the fact that if they are approved for one loan, the next loan that they want to take out is automatically approved. There are no severe checks to ensure affordability. There is no system in place for these companies to ensure that the customers have the same income or profitability than the previous application.
This happens so often to the average person in the United Kingdom that it is worrying. The lenders themselves should be more responsible and put peoples lives before profit margins, but the fact is that they are businesses, and they are driven by profit rather than the customers themselves.
There are the same issues with long term loans for businesses. Once a business takes and completes a business loan, they can reapply with automatic approval after paying the first loan off. I will get into more detail next post, because there is a certain type of loan that causes this.