Did you know that borrowers who take out short term loans and payday loans receive far more protection than borrowers who take out unauthorised overdrafts, logbook loans, guarantor loans, and many other types of Financial products?

 If you’re looking for between £80 and £2,500 with between one and twelve repayment dates, there are far stricter rules governing both how much you’ll pay for your loan and how the company you’re borrowing from treats you if you get into financial difficulty than with any other part of the financial sector.

 In this article, BestUnsecuredLoans looks at:

• who the Financial Conduct Authority is
• why payday loans and short-term loans are as heavily regulated as they are
• what the FCA’s 8 golden rules are
• how BestUnsecuredLoans and our panel of lenders are licenced and fully compliant
• how to apply for a payday loan or a short term loan through BestUnsecuredLoans

Who are the Financial Conduct Authority?

 Independent of the British Government, the Financial Services Authority (FCA) regulates most of the UK financial service industry. That’s everything to banks to financial advisors to investment funds to loan providers.

 They replaced the Financial Services Authority(FSA) in early 2013. The FSA was widely thought of as being far too lenient on financial services companies. Many people blamed them for the lax lending standards which led to the house price bubble which exploded in 2008. Other people blamed them for being too soft with the banks on issues like payment protection insurance, overdraft charges, and more.

 The FCA is the tough new regulator whose role is to stick up for the interest of people and not companies. One of the first areas that they set to work on was sorting out the payday loan and short term loan sector, otherwise known as the HCSTC (high cost short term credit) industry.

Why do payday loans and short-term loans need such heavy regulation?

 By the time the FCA come into existence, payday loans and short term loans had attracted a lot of bad publicity. Some called it the “Wild West” of lending because it was a brand new industry and no-one was quite sure how the company in the sector should behave.

 In 2015, 8 new golden rules were introduced that all payday loan and short-term loan companies had to follow – including brokers. These rules were put in place to protect consumers from what many debt charities felt were Lenders who were charging too much and who were using unfair techniques and tactics against borrowers who had not kept up their repayments.

 The new rules were strict. Lenders now had to prove to the FCA that all the systems within their companies could comply with the new regulations. If they could prove it, they would win a licence which would allowthem to offer loans to people. Many companies dropped out straight away with others leaving the sector a bit later on, as reported on industry website Loantalk.

 What are the eight golden rules which give you, as a borrower, more protection than ever before?

The FCA’s golden rules

 Rule 1 – no more than 0.8% interest per day charged on a loan

 That’s equivalent to 80p per day on every £100 you take out. That means that, if you take out a loan for £100 over 30 days, you can’t be charged more than £24 in interest (that’s 30 days multiplied by 80p a day). Likewise, for a loan of £500 over 60 days, you can’t be charged more than £240 in interest (that’s 60 days multiplied by £4 per day).

 Rule 2 – no more than £15 charged for defaulting on your loan

 If you fail to make a repayment on the date that it’s due, your lender can charge you no more than £15 in fees for the “default”. Since the new rules came in, to remain competitive, many lenders have actually dropped their default fee altogether for customers struggling to pay back their loan. Please make sure that you check with your lender prior to taking out a loan whether they apply a default fee to your account if you miss a scheduled repayment.

 Rule 3 – fees and interest must cost no more in total than the amount of money you borrowed in the first place

 Although lenders are allowed to continue charging interest to customers who have defaulted on their loan in some circumstances, the total amount any borrower must pay back in interest and fees must never come to more than the value of the loan in the first place. So, if you borrow £500, you’ll never pay more than £500 in interest and fees.

 Rule 4 – lenders cannot attempt to collect payment from you more than twice

 When you agree to take out a short-term loan or a payday loan, your lender collects payment from your debit card using something called a Continuous Payment Authority (CPA). A lender may attempt to collect a payment from your account twice using CPA. They are allowed to charge a default fee on the first failed attempt to take money from your bank account but not on the second.

 If they have been unsuccessful in collecting payment twice, they are not allowed to make any more attempts to debit your account. From that point on, they must try to contact you to find out why you’ve not made your repayment. To reactivate your CPA, you have to give your lender the permission to do so.

 Rule 5 – lenders must point you in the direction of help if you’re struggling to make repayments

 Once you let your lender know that you’re experiencing difficulties in making a scheduled repayment, they must direct you to somewhere which can give you free, independent, and impartial debt advice. If you engage with a debt recovery expert, your lender must give you all the time you need within reason to work out a repayment plan that’s realistic and that’s not going to impose further hardship on you and your family.

 If you have any complaints about the way you have been treated by your loan company and you don’t feel that your complaints were treated fairly or to your satisfaction, they must direct you towards the industry ombudsman who is there to sort out all disputes between borrowers and lenders in a fair and even-handed way.

 Rule 6 – lenders must give you time to work out a realistic solution on how to pay back your loan

 If you ask for help and you let your lender know that you need breathing space to sort out your financial affairs, they must be as accommodating as possible to you. They need to take the attitude that they’re here to help you, not to make things more difficult for you.

 You and they must focus on getting the debt as it is today paid off and every attempt should be made to make sure that your level of indebtedness is not added to. There is an onus on you as the borrower here – if your lender doesn’t know, they’re going to struggle to help you. Be open, be transparent, and be realistic with your lender to get the fullest range of support possible from them.

 Rule 7 – lenders must consider any offer you make to pay them in small increments while you get your financial situation sorted out

 If it’s got to the stage with a borrower when they’re in real financial difficulty, a lender must listen. If making a repayment is going to make other areas of life difficult like paying the mortgage, paying the rent, buying food, or being able to meet your electricity or gas bill, your lender must be open to accepting small “gesture” payments from you so that you can reduce your overdue balance while you’re getting yourself sorted out.

 Rule 8 – there are strict rules about contacting someone who is behind on payments

 When you’ve let your lender know that you’re having financial problems and that you’re unable to stick to the repayment schedule you agreed, there are strict rules governing how your lender makes contact with you.

 They must not make an excessive number of phone calls to you nor send you constant texts or emails. The tone of their communications with you must be non-threatening and they not use menacing language in any way.

 Lenders are not allowed to phone you at work without your prior permission nor are they allowed to speak about your debt with your employer or your family members. In fact, they can speak about your debt with you and only you unless you have given them permission to speak with a debt advisor acting on your behalf.

BestUnsecuredLoans and the FCA

Along with the rest of the industry, BestUnsecuredLoans supports the Financial Conduct Authority in its attempts to protect consumers when they get into financial difficulty.

 We’re an FCA-licensed broker (check out our licence by clicking here) and all of the lenders on our panel are FCA-licenced too. For you, our customers, that means that you can be assured of compliance and best practice at all stages of your application and on how you’re treated after you’ve received your short-term loan or payday loan.

 How is a broker different from a lender? A broker doesn’t actually lend you money – what we do is to put you in touch with lenders who’d like to work with you and lend you money. There’s no charge to our service at any point, regardless of whether you take out a loan or not.

 Every lender we work with looks for a certain type of borrower and they share this information with us. When you apply through BestUnsecuredLoans, we compare the details you give us with the information we get from our lenders about the type of borrowers they like to work with. Our computer then matches you up to the most suitable lenders for you – this all happens within seconds.

 We then run a credit search on you and send those search details to the lenders for review. Again, within just a few seconds, we start to get the first “yes” and “no” answers back. Once we have the details of the loans in from all the companies which have approved you, we then present you with the cheapest loan we can find.

 It’s that simple. If you like the offer we’ve found you, read the terms and conditions of the loan and if you’re happy with them, electronically sign the documents and your loan will be in your bank account normally within the hour (it may be longer depending on the loan company you agree to work with and the policies of your bank).

 Apply for the right loan for youwith full FCA protection through BestUnsecuredLoans

 Here at BestUnsecuredLoans, we have very close relationships with the widest selection of lenders so that you have the very best chance of getting the cheapest payday loan or short-term loan for you.

 To start your application, please click here.