Payday loan lenders vs. the banks – what’s the real story?27 Jan
In a statement issued today, loans industry expert Gary Miller-Cheevers (and CEO of the soon-to-be-launched Speed-e-loans.com) responds to the recent ‘bad-mouthing’ of the payday loans industry. He says:
Not a week seems to go by when we don’t see one of the tabloids scream “outrageous charges made for credit by payday lender X”.
What they are referring to is the APR (Annual Percentage Rate) or EAR (Equivalent Annual Rate), which is how the Office of Fair Trading has deemed that the cost of financial products must be calculated so that consumers can make a choice, on a level playing field.
The problem is that it is not a level playing field, in fact it is a very uneven playing field.
Take our payday loans service for example. We charge the equivalent of around 1% per day plus a one-off funding fee of £4.95 for a loan that is meant to be repaid in less than 30 days. So for example, a loan to pay an urgent mobile bill of £100 for 20 days (until next payday), which takes less than 2 hours to underwrite and transfer into a customer’s bank account, would cost £25.94 in fees and charges. This seems fairly straight forward and the customer can either say ‘yes’ or ‘no’. But we have to quote an APR of 2686% according to the ‘rules’.
Now take the same customer who needs £100 to pay an urgent mobile bill and goes overdrawn. If that overdraft is unauthorised, Halifax will charge £5 per day for up to 20 days, thus £100!
This is nearly four times the charges of our payday loans service, and what rate do Halifax quote? 0% !
This is explained on their website* that as they charge fees and not interest, their EAR is 0%.
But still, Speed-e-loans.com charges £25.94 and Halifax charges £100. Make your own mind up who is the best value for this loan!
CONTACT: Gary Miller-Cheevers, Speed-e-loans.com, CEO, telephone: 0844 879 3199 or 07590 563377, email: gmc@speed-e-loans.com
*http://www.halifax.co.uk/bankaccounts/currentaccount.asp?pagetabs=1
