Exploitation

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I recently mentioned my occasional involvement in the campaign to impose an interest rate cap on those lenders who charge exorbitant fees in the secondary loans' market in the UK, and elsewhere. These loans are unsecured to those often without a credit record who borrow relatively small sums in cash. The leading supplier is Provident Financial. Their average APR is 177%.

That's nothing though compared to an example I've been sent in the following mail (which is genuine bar the name being deleted):

Dear X,

Thank you for your request.

Your loan limit will be determined by your net pay. Loans can be outstanding for
a maximum of 31 days and repayment dates are determined by your pay frequency.
All loans are due to be repaid in full on the next date your salary credits
your bank account as our client does not offer extensions or rollovers.

Poundstillpayday.co.uk charges only £29 per £100.00 borrowed!

If you have any questions, please contact us via:

Freefone: 08000 32 76 55
Fax: 08000 66 45 27
Email: customercare@poundstillpayday.co.uk
On-line Chat: http://www.mypoundstillpayday.co.uk/chat.html

We are available from 7am to 11pm on Monday to Friday, from 9am to 5pm on
Saturdays and from 12pm to 6pm on Sunday. One of our friendly customer service
staff will be happy to assist you.

Thank you for choosing PoundsTillPayday.co.uk

That's £29 for a £100 loan for a maximum of 31 days. I checked their web site. It says under APR calculation:

Our Fee:

£29 per £100, for example, if you borrowed £300 your repayment amount would be £387 due in full on your next payday.

The APR over 31 days would be 341%

Remember, that's the best case. If you borrow over a shorter period the cost skyrockets. This is straightforward exploitation.