High street lenders impacted by regulations and new price cap

Following the introduction of FCA regulations a year ago and a price cap in January 2015, the Consumer Finance Association, which represents some of the best-known short-term lenders, today provided a short update on access to credit via high street stores offering short-term loans:

Latest analysis by the CFA shows a decline of 58% in the number of stores offering short-term loans on the high street since 2013.

This is due to a number of major lenders leaving the market, including Cheque Centre (451 stores), Albemarle & Bond (187 stores), Cash & Cheque Express (22 stores) and Cash Store (27 branches). With no new store openings and the closure of up to 200 Money Shop stores currently ongoing, there is nearly 900 fewer stores offering short-term loans compared to 1,411 identified by the Competition and Markets Authority in August 2013.

Along with tighter lending criteria that have been introduced as a result of the new regulations, this reduction in store numbers further reinforces concerns about access to credit being overly restricted for customers.

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For more information, or for interviews with the CFA, please contact Richard Griffiths at richard.griffiths@cfa-uk.co.uk or on 07875 653959

Editor notes

* Shrinking market/profitability

  • The payday loan market (by volume of loan approvals) has shrunk by more than 75% from its peak in 2013 according to CFA member data.

** High street stores

High Street Stores That Offer Payday Loans: Year-End 2015. 2001 to 2013 is from CMA (Page 15, https://assets.digital.cabinet-office.gov.uk/media/5329df7ee5274a226b00028f/140219_local_competition_wp_excised.pdf) , the rest from other public sources. The Cash Store and Cheque Centre no longer offer payday loans.

Number of high street payday lenders 2001 to 2015

high-street-lenders-2015

*** Payday loan prices pre and post cap

The average price pre-cap was £30 per £100 borrowed according to FCA and CMA:

The CMA found that headline prices have tended to cluster at approximately £30 to borrow £100 for a month, equivalent to 30% a month or 1% a day. Our own analysis (supported by CMA findings) suggests that, when all costs and charges are considered, the per-day price can be higher. Our data shows that per-day prices vary across the market, from 0.4% to above 4%, with most in our sample of loans (Figure 1) being between 1% and 2% equivalent daily rate.

Page 67 http://www.fca.org.uk/static/documents/consultation-papers/cp14-10.pdf

About the Consumer Finance Association

  1. The CFA is the principal trade association representing the interests of some of the best known short-term lending businesses operating in the UK. Members include The Money Shop, Quick Quid, SpeedyCash, Payday Express, Payday UK, Peachy, Sunny and WageDayAdvance.
  2. The CFA paved the way for the FCA’s statutory regulation by driving industry improvements and best practice through the implementation of an industry-wide Good Practice Customer Charter and the CFA’s own Code
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