Speed e Loans CEO Backs Call To Cap Payday Loan Charges

The move by Labour MP Stella Creasy to get a cap on the interest rates payday lenders can charge their customers in place by Christmas received backing from an unexpected source today – CEO of payday lender Speed e Loans no less.

Gary Miller-Cheevers issued a statement today which reads:

“We (Speed e Loans) fully endorse stopping disreputable companies from piling a debt of misery on to their customers with extravagant loan costs – however, it has to be done in such a way that the less than scrupulous providers cannot still rip off unsuspecting customers in other ways – such as charging higher fees and penalties.”

“Payday loans fill a short term need and used responsibly, can be a cost-effective way to get emergency cash when the need arises. With research showing that 31% of Britons have no accessible savings, if someone is hit with an unexpected bill (for example, they get a flat tyre and need their car in order to get to work), a payday loan could help them manage until they get next paid.”

Mr. Miller-Cheevers does point out the one shining flaw in the idea of capping interest rates which we pointed out in a previous article about payday lenders coming under fire from Stella Creasy when he asks what exactly does the MP for Walthamstow in East London want to cap, the APR (Annual Percentage Rates) or the cost lenders charge for the loan?

“The APR being an expression of annual interest is a wholly inappropriate measure of a loan that can last from three days to a few months in extreme cases. Speed e Loans average loan request is for a term of 19 days and works out at a daily rate of 1% interest!”

“Speed e loans is all in favour of expressing the cost of their loans in monetary terms, so customers can firstly, easily compare the actual cost and secondly, quickly work out if it is something they can afford.”

The CEO and loan industry expert went on to use the example of borrowing £100 from a work mate on Tuesday and then paying him back Friday night in the pub after work and treating him to a £5 fish and chip supper on the way home as a way of saying thank you. This actually works out at a daily interest rate of 1.25% which gives an APR of more than 6000% even though most of us would consider the cost of a takeaway for one to be a more than reasonable price to pay for the loan of £100.

“If total cost of credit is the target, maybe the authorities should start with the banks who can charge £5 per day for a £100 unauthorised overdraft, which equates to an APR of over 80,000%!”

“The banks say that they only ever charge the fee for a limited time – well so does speed e Loans.”

Both MP Stella Creasy and Scottish MSP Margo MacDonald (who has been trying to get payday lenders banned in Scotland) would increase their chances of success if they 1 – acknowledge payday loans are in fact useful and fill a need in the loan market and 2 – forget the APR argument because it just doesn’t stand up to scrutiny and go for a monetary cap instead.

Somewhere around £30 per £100 borrowed per 30 days – that’s 1% a day.

Factor in admin, advertising costs and the fact that around 10% of all payday loans are not paid back and anything less will probably drive many payday lenders out of business. Although a cull might not be a bad thing, driving the entire industry of business would just see a rise of illegal loan sharks stepping in to fill the need.

In August 2011 Speed e Loans won an award as ‘Most Responsible Lender’ and also earned 5 stars from us when we reviewed them earlier this year.

You can read our review of Speed e Loans and learn how they can be used to repair your credit report here, visit their website for more details here or you can see how they compare to other lenders in terms of charges, speed of payout and amount you can borrow by viewing our payday lender comparison chart.

Source: Cision