QuickQuid’s Quick Split: Payday lender exits UK market

November 4, 2019

2 min read

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What's going on here?

Payday lender QuickQuid has decided to pull out of the UK market, citing regulatory uncertainty after having failed to reach a satisfactory conclusion in negotiations with UK regulators.

What does this mean?

In 2015, after protests from many MPs, and even the Archbishop of Canterbury, the Financial Conduct Authority (FCA) brought in tougher rules for payday lenders such as QuickQuid. Interest rates on loans were capped at 0.8% per day and debtors could never be asked to pay more in interest than the value of the original loan. For example, when borrowing £2,000, the maximum amount that could be charged was £4,000. Prior to this, QuickQuid had been charging exorbitant rates of interest on some loans. The lender previously charged an interest rate of 25% every “payday” on every £100 borrowed. To put that into a real life situation, suppose a £100 loan was given to someone getting paid once a month. If the debt was unpaid after one month, they would have to pay £125. At the end of the second month, £150 would be due, and over the course of a year the debt would total £400, 4 times the original loan.

What's the big picture effect?

While payday lenders have come under a lot of criticism, and their demise may be celebrated by some, others argue that they provide a valuable service in the economy. Payday loan companies such as QuickQuid offer to send money to your bank account the same day, without the credit checks or delays of other, cheaper routes. Indeed, this quick approval represents more of a risk to payday lenders than it does to other lenders with access to more information. Further, QuickQuid and similar businesses often have tools on their website which show borrowers exactly how much it would cost them to borrow. 

However, many commentators criticise the companies for preying on the most vulnerable in society, such as those who have a poor credit score and would struggle to borrow elsewhere. While QuickQuid’s competitor Wonga, which has also since folded, claimed in 2013 that only 2-3% of its borrowers get into further financial difficulties, horror stories and criticism continued to come from NGOs and MPs alike. 

Whoever you believe, QuickQuid’s withdrawal from the UK market does beg the question whether legislators are “legislating out” useful services in the UK economy, or whether these companies are so potentially dangerous to the vulnerable in society that legislation must be strict to avoid ruining lives.

Report written by Luke Hatch

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