Last month the Financial Conduct Authority (FCA) released a report into the lending practices of Short-Term High-Cost Credit companies to their repeat customers.
Their report found that repeat customers accounted for around 80% of the industry. As a result, the FCA has raised “significant concerns” around repeat marketing and the underwriting processes of some companies.
What are the issues?
The review of the Short-Term High-Cost Credit industry investigated the borrowing history of 250,000 customers who had applied for various products such as guarantor loans, payday loans, rent-to-own and doorstep credit.
As the cost to service repeat customers is much cheaper than obtaining new clients, the report found some companies placed so much emphasis on repeat lending that their processes and marketing were, in some cases, seen as “exploitative”.
This potentially causes “customer harm” leading to a debt spiral. Some firms even fast-tracked applications, bypassing their normal affordability checks for repeat customers; instead, they relied on simply “asking” the customer if their financial circumstances remain the same.
The marketing practices for firms offering Short-Term High-Cost Credit, Pay Day Loans, Guarantor Loans and Doorstep Credit could also have a detrimental effect on the customers’ finances according to the report.
Examples included “pop-up” adverts for a Short-Term High-Cost credit that were designed to encourage customers to apply for more than they needed. In some cases, this contributed to the customers building up unsustainable levels of indebtedness.
Firms were seen to be recommending customers apply for a Short-Term High-Cost Credit loan for things like holidays with pictures of tropical beaches to entice customers to apply.
How is QuidMarket different?
Here at QuidMarket, we process each and every application manually meaning we will never fund a loan when there is evidence that the customer would be unable to repay in a sustainable manner.
For repeat customers, our online application form is a little quicker and easier than a first-time customer. This is for your convenience as your account with QuidMarket stores your personal details only for review.
We will always perform an affordability assessment every time so we can ensure the new loan is affordable for you. Even if you fully repaid a loan recently. Our affordability checks do not differ from a new application meaning we will never knowingly approve an application that is unaffordable.
Tempted by Increased Limits?
Obviously, when a customer returns to QuidMarket, the amounts they can apply for may change depending on their Credit Reference Agency Report, repayment history and many other factors.
As the title suggests, the High-Cost Short-Term credit industry is an expensive form of borrowing and so you must ALWAYS only ever apply for the LOWEST amount you require and can afford to repay sustainably.
While it might be tempting to apply for a higher amount, maybe to add the odd £100 or so for a night out or restaurant, it will increase the amount repayable significantly. This means you run the risk of not being able to maintain the repayments.
At QuidMarket we cannot stress enough the importance of only applying for what you need and what you can easily afford. We help thousands of families get through times of short-term financial hardship, especially during this last year with the stresses and strains of the COVID Pandemic.
Who can I talk to if I am having difficulty paying?
First of all, if you feel you are having problems repaying your QuidMarket short term loan you should always come to us to discuss your options.
We are a small company who pride ourselves on our human approach. We will always treat our customers fairly so if you are in financial difficulty please contact us so we can help.
Communication is key so get in touch as soon as possible to allow more options and flexibility when discussing your loan going forward.
If, however, you feel your financial difficulties are more far-reaching there are a number of options available to people.
Money Advice Service
Step Change Debt Charity
Citizens Advice Bureau
Warning: Late repayment can cause you, serious money problems. For help, visit: moneyadviceservice.org.uk