Direct Payday Lenders

1
Direct Payday Lenders
2
In the year 2012, the Consumer Financial
Protection Bureau conducted a series of
investigations into the world of direct payday
lenders being offered by a growing number of
depository institutions. The purpose of these
investigations was to analyze different ways of
introducing the customer a more stable, friendly
and at the same time a competitive payday loans
market. The need for such forums was emphasized
in furthering this industry like any other
industry but not at the cost of the borrower. 
3
Through this forum, it was found that there needs
to be sufficient amount of data that needs to be
established which could present a true picture of
the payday lending market and what impact they
are having on the customer including the need to
understand how the use of such products is
affecting the borrower from a long term point of
view.
4
This was not just limited to the institutions
that were in charge of this industry but first
hand consumer feedback was taken which displayed
the commitment towards change. Although consumers
did favour the accessibility of the loan, the
availability of these loans for consumers who
dont qualify for other lines of credit and the
consumers ability to use these financial products
as a definite mean to avoid overdrawing a deposit
account or in the case of late payment of bills.
5
(No Transcript)
6
Direct payday lenders generally serve the purpose
of bridging the gap between your income and
expenses. No matter what your source of income
is, there are always unprecedented expenses which
one should be prepared for, is the vision with
which this institution was set up. Payday loans
are typically charged not on the basis of a
predetermined market rate which is usually not
subject to change, but on the basis of the amount
of loan you have borrowed, irrespective of the
loan duration.
7
Cost What is the cost of a payday loan? The cost
of a payday loan is typically defined by the
amount you have borrowed and usually does not
vary with the duration of the loan. The cost is
expressed as an interest fee usually on the
parameter of every 100 pounds you borrow and
usually ranges between 10 pounds to 20 pounds. If
there is a variation, it is usually because of
state laws differentiating from state to state
with them allowing maximum payable fees. A fee of
15 pounds for 100 pounds of a loan amount is
found to be most common with an average APR of
391 on a typical 15 day loan. However this
varies and there are certain lenders who offer
APR as high as 6000.
8
Eligibility Many states have a limit on the size
of the loan available which could be a maximum of
500 pounds. In order to be eligible for a loan,
all you are required to do is to present
identification and a documentation of income
along with a personal deposit account. There is
usually no other financial obligation and your
credit score is usually not a precedent in being
eligible to apply for such a loan. There are some
lenders who check your credit rating through
various specialty credit firms to check your
capacity to pay and whether you have defaulted on
your previous payday loans. Since they have
access to your deposit account, there is no other
collateral found necessary.
9
(No Transcript)
10
Repayment Direct payday lenders expect their
borrowers to come to the store front on the due
date to pay back the loan. If they are unable to
do so, there is a fee which is payable to the
borrower equal to the finance charge during the
initial loan and they are allowed to roll over
their loan. However there are certain state laws
which are against the rolling over of loans. This
means that it is the responsibility of the
borrower to ensure he pays back the full loan
amount and then quickly takes out another loan.
11
Limits on Repeated Use Payday lending has been
largely governed by state law and there have been
times where there has been legislated to amend
state usury laws to allow payday lending in that
particular state. Hence, payday lenders are
required to comply with the laws of the state in
which they function. After the regulations on the
industry, the states are making an attempt to
limit the sustained use of payday lenders which
includes provisions such as limiting the number
of times you can roll over a loan, requirements
to offer extended repayment plans, grace periods
between loans that are triggered over a period of
time indebted, limits on the amount of loan
dependent on the amount of income you have and
lastly the limit on the number of times you can
take a new loan over a particular period of time.
12
Another avenue that has not been given enough
attention is the world of online payday lending.
Although online payday lenders make up only a
minority of the amount of loans worldwide, it has
been observed that they are rising and within a
few years, will overtake the store front volume.
Variations on the loan structure such as online
payday installment loans and more open-ended
lines of credit are becoming more common. In the
online method, a borrower completes the entire
procedure online and all the authorization is
done online for the lender to debit his account
at the time of loan repayment.
13
(No Transcript)
14
In the field of online payday lending, all the
instructions are meant to be displayed in a clear
and transparent manner in order to ensure that
all the terms and conditions of loans are
communicated properly. If the online loan is set
to roll over automatically, the borrower must
contact the lender a few days before the
electronic withdrawal is mainly to communicate
that they wish to pay the loan in full.  
15
For more information go homepage
www.bfwggrants.org.uk
16
Thank You