Some lenders in the UK have been piling on unnecessary charges as found by the Financial Conduct Authority. After a regular analysis, over a hundred lenders who carry out certain unfair practices, which could make the borrowers save over billions, are cheating borrowers. Because of the fact that loans are available at the cheapest interest rates at the moment, more and more borrowers are taking loans in order to fulfil their wishes to own a luxurious car or go on an extravagant holiday. However, when they weren’t able to repay the loans, these companies decided to make some money and dig a hole for these customers. These lenders charged an unacceptable amount of money as late fees and defaulting charges in order to fetch some profit for themselves.
The review has found that these charges piled on guaranteed loans for consumers made it difficult for the customers to repay the amount while also adding to their financial crisis. The authorities are now forcing lenders to change the way they operate and provide a better deal to the consumers. The FCA has also found that if the lenders had not charged these irrational charges, the borrowers would have saved over 70 million per year. Furthermore, they were found not following their own guidelines and ensuring that the borrower is not facing difficulty in repaying the amounts in due time. These lenders made it worse by imposing a plethora of unfair late fees and other charges in every bill.
Without worrying about whether the consumer can actually afford the loan or not, the lenders levied charges, which only pushed these borrowers in persistent debt. It is actually unethical for firms and lending institutions to continue levying fees and charges on customers who are not in the financial condition to repay the amount. In fact, they are required to wave off any charges, which they can, in order to ensure that the amount is not being a burden for the borrower.
Are Lenders looking for Victims for Predatory Lending?
As the name suggests, Predatory Lending is simply lending which might seem unfair because of the practices carried out by the lending institutions. If anything, that the lender does which you feel in unjust or deceptive that’s considered predatory lending. While there are no concrete rules, which determine whether the loan process is fair or not, the lenders are required by law to check whether the customer is struggling to repay the amount. In case the customer is facing difficulty, they must wave certain charges or postpone them until the customer can actually afford to pay them.
High-interest rates, unnecessary charges, prepayment fees are some of the examples of predatory lending. However, the customer’s financial position also plays a major role here. For instance, a person with bad credit might be charged a higher interest rate than those who have a good credit rating. However, if the interest rate is exceptionally high and makes the borrower feel like it is something they cannot afford, it’s something the lender should essentially look into. Since there are no solid rules that state what’s illegal and what is not, a large number of lenders actually make profits while remaining within the law. There are responsible lenders and predatory lenders in the market, the borrower must know which is which.
The FCA has decided to ensure that lenders follow guidelines so that they can deal with the long-term debt problems that millions of citizens are facing. The helplessness of these citizens is actually a source of a steady flow of money for some lending institutions. Predatory Lending is not something that occurs instantly, there are cautionary signs, which the borrower must see in order to escape this financial anguish. A large number of firms and lending institutions have started to take up new policies to ensure that the customer is told about late payment charges or such fees beforehand.
Overall, Borrowers in Britain must definitely check whether the guaranteed loans that they are applying for are even suitable for their financial condition or not and whether there are any hidden charges. Additionally, if a loan feels like a burden, it should be communicated to the lending institution.