UK payday lenders began to spring up online back in 2003. Subprime short term lending soon become big business and continual growth lasted for a good decade. A major battle for dominance had played out between 2 American groups. This included Cash America who controlled QuickQuid plus Pounds to Pocket (now merged with On Stride). Then there was DFC Global (was Dollar Financial) who had acquired Payday Express, PaydayUK and The Money Shop. British-based Wonga went on to become the industry powerhouse, but there was a storm brewing ahead when the FCA replaced the OFT as the financial regulator in 2014. The FCA would unleash industry capping in early 2015 with further rulings that pushed many firms over the edge.

They were also trigger-happy with heavy fines that only giant banks can typically manage to soak up. There had been an estimated 200 firms operating, but most of which have closed and others that survived made the switch to provide instalment products where greater profits can be sourced. The most high profile closures were PaydayUK and Wonga. Wonga’s downfall seemed inevitable when their 2015 report highlighted an after tax loss of £76.5 million. In contrast, this was a brand that at their height had surpassed 1 million customers and had been issuing approx 10,137 loans daily. They even had their logo printed on the shirt of 3 football clubs at one time (Blackpool, Hearts and Newcastle).

About: Niche

Banks and mainstream lenders are judgemental and aim to minimise the risk of potential default. Those with bad credit and even those with less than perfect scores don’t usually make the grade. This is why there has been a huge market for specialised subprime companies to fill the demand. A low cost solution is credit unions, but they usually require appointments, membership sign-ups and payouts (when successful) are slow. Payday firms in contrast can send rapid same day cash with no faxing or required document requests in many cases. Payouts may even extend across weekends. These products used to be very expensive, generally due to expensive transfer fees. The FCA’s cap has at least corrected this.

Interest and all associated fees can now not surpass 0.8% daily. This translates as £24 for £100 over a full month of 30 days. This is even cheaper than some bank overdraft products. It is usually the case that money borrowed will need to be repaid on the next pay date. Select providers do offer greater flexibility though where you can choose the specific day within the month or there may be X number of months offered where you can spread the cost further and devise more affordable repayments. First time borrowers are typically capped at around £300 with larger sums up to £1000 typically reserved for existing customers who have proven trust.