4 February 2013
It’s as cheap or cheaper to borrow via a payday lender rather than a bank, CISI research shows
New research* undertaken by the Chartered Institute for Securities & Investment (CISI) has shown that customers looking to borrow money on a short-term basis might be better off going to a “pay day lender” rather than a high street bank.
The CISI, the 40,000 strong professional membership organisation for those working in the securities and investment industry, in the February edition of its magazine Securities & Investment Review, compares the cost of taking out a £200 unauthorised short-term overdraft from a typical payday lender, Lloyds Bank and Nat West.
The cost of borrowing £200 from the payday lender was £66.
However, from Lloyds Bank the charge for borrowing the same amount was £84.22, an APR of over 2,200%, and at Nat West the charge was £110, an APR in excess of 4,000%.
Simon Culhane, Chartered FCSI and CISI CEO said: “Late last December the Government, as part of the Financial Markets Act, undertook to introduce a cap on the amount of interest that can be charged on a loan. However, this legislation was aimed at payday lenders.
“The scandal isn’t the rates charged by payday lenders but the rates charged by banks. The complete silence on rates being charged by banks for unauthorised borrowing is mystifying.
If the Government does legislate for a cap on interest we can expect to see the payday lenders focusing on charging fees, rather than interest, which will then allow some real comparison.”
*Research document - Example of APR ratesShare this Press Release