Dr Joseph Spooner, Assistant Professor of Insolvency Law at ÐÓ°ÉÂÛ̳ Law, commented on the demise of pay day loan companies in The Economist recently.
The FCA introduced tougher regulations on pay day lenders’ business models from 2014, contributing to the demise of Wonga and other payday-lenders. The new rules include prohibiting daily interest rates above 0.8 percent of the sum borrowed, including fees. Previously, daily interest rates of 10 percent were common.
Dr Joseph Spooner says many pay-day loan businesses relied on “sweatbox lending”, which meant that when debtors entered or neared default, they would be encouraged to take out new loans again and again.
You can read The Economist article in full .