

Legislators in the United Kingdom have asked the Financial Conduct Authority (FCA) to implement changes in the country’s high-cost credit industry. This development comes after the largest provider of payday loans, Wonga, collapsed into administration. The company and many others functioned with predatory, unsustainable business models that rely on trapping consumers in the cycle of debt and relending. The FCA aims to argue that affordable loan prices aren’t just good for customers, they lead to successful credit firms.

Affordability & the Credit Business Model

FCA regulator Jonathan Davidson recently made a speech about the issue, highlighting how the agency aims to make changes. Their goal is to make loans affordable for the average consumer and they plan on doing this by changing the business model of high-interest credit firms. Particularly honing in on the automotive financing and rent-to-own industries, the FCA wants to save consumers in the UK millions of pounds every year. Considering that over 5 million loans were taken out in the first six months of 2018, this is entirely possible.

According to experts at the site MoneyPug, which specializes in helping consumers find the best same day loans , Wonga collapsed because their payday loans were unaffordable. The FCA aims to work closely with companies to show them that offering reasonable loan interest is actually better for the business in the long-run, providing longevity and sustainability.

While Americans are typically wary of the government collaborating with credit companies, the cost of loans has gotten so out of control in the UK that regulators need to intervene. However, it isn’t as easy as enforcing regulations and making new ones, the FCA has said that they need to change the company cultures of these businesses.

Changing Company Culture