Friday, 26 August 2011

Dissecting Responsible Lending - part 3, repeat business

Zero-credit is delighted to welcome Steve Perry, author of "When Pay Day Loans go Wrong" and founder of the campaign website,, as a guest blogger. Steve will be challenging the responsibility of PayDay Lenders over a short series of posts this week. Read Parts 1 and 2 here!

It has been widely stated by financial experts of all different backgrounds that the business model for a payday loan company is specifically to attract repeat customers, either through monthly payments of interest only, or enticing a customer to return on a month to month basis. Whilst this can only be considered an opinion, it has many merits.


For example, a customer borrowing 100 pounds, repaying 120 pounds and never using the service again would probably cost the payday lender more money than the profit it made, through setting up the account etc.. However, should that customer return a month later and borrow 150 pounds, repaying 200 pounds, then within two payments a total of 70 pounds would have been made. Repeat business is the cornerstone of payday lending.  

It is, therefore, surely in the interest of a payday loan company to convince borrowers to use their service repeatedly for their business model to work. What's more, I believe this has been proven through payday loan companies' targeted advertising towards repeat customers. I myself am still receiving countless emails from payday loan companies trying to sell me their products. Often the email has a subject title like “all applications accepted for 400 GBP”, and in the body, I find that nothing can stop a Kwik Payday loan, not bad credit and not even some fictional foe designed to weaken the powers of a super hero!

It would seem there is absolutely nothing preventing you from taking out a Payday loan. Responsible lending at its very best.

To summarise my entire payday loan experience - one that has cost me thousands of pounds in dead money and levels of stress that to this day I do not know how I managed to cope with - I would have to say that there is clear evidence, that payday lending is irresponsible. I readily admit that my own irresponsible borrowing has been a major factor in the financial crisis I face today. However, it has also been proven, beyond question in my mind, that the burden of guilt and responsibility must also land on the shoulders of the payday lenders.

These companies have shown a complete disregard for my borrowing habits, a total lack of interest in my other financial commitments and an inadequate level of customer service skills in dealing with the problems I have faced. Finally my experience tells me quite clearly that if the payday lending system should continue to be used within the United Kingdom, an independent and specific regulator must be brought into power to control the actions of loan companies that clearly show no ability to control themselves or their customers.


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