QUICKQUID, ONE of the first payday lenders to emerge in the wake of the financial crisis, has confirmed UK operations will cease. Owners, US firm Enova, have complained of “regulatory uncertainty” as being their primary reason for leaving the UK market.
It is the latest same-day lender to go out of business following the squeeze that has been imposed on such firms through greater regulation by the Financial Conduct Authority (FCA), a body created to ensure good practices are upheld in the credit market. Since the imposition of tighter regulations, big name brands such as Wonga Loans and The Money Shop have also had to close their doors.
Many critics of these firms complained over their predatory practices, sky-high interest rates, and their offering of loans to those with bad or little-to-no credit history. Many of QuickQuid’s quoted Average Percentage Rates were well over an eye watering 1000 per cent.
To put this into perspective, the Bank of England base rate currently stands at 0.75 per cent. Enova was keen to stress the work they have done with the UK financial regulatory body, the UK Financial Ombudsman, to resolve the complaints made against the company in recent years. Enova claimed they wanted to secure a “sustainable solution,” however talks between the firm and the UK Financial Ombudsman broke down when a solution could not be reached.
In the wake of the 2008 financial crisis and subsequent ‘credit crunch’, many consumers quickly found themselves locked out of the market for easy-access credit. Very quickly, television adverts began appearing on our screens offering quick, no questions asked loans. During their peak in 2009, payday lenders issued £1.2billion worth in loans, with an average loan coming in between £210 and £270, loaning in far greater proportion to the section of UK society with the lowest income.
Many of the firms offering these loans were lambasted for their highly uncompetitive interest rates. While many seeking short-term finance were locked out of mainstream lending as a result of constrained incomes and employment opportunities, payday lenders such as QuickQuid soon became a lender of last resort.
This, coupled with the dramatic squeeze in income and employment opportunities experienced by many due to the recession, allowed QuickQuid and others to soon dominate the UK credit market. Calls to regulate these sorts of practices were being heard as early as 2008 when Vince Cable expressed concerns over the growth of payday firms. Opposition parties in Parliament also began pledging tougher legislation on these firms. By 2013, the FCA was established in order to curb the endemic problem of payday lending. And in 2016, Google formally announced all payday lenders would be barred from advertising on their platform. Many have sought redress through the Financial Ombudsman. So far just under two-thirds of complaints have been upheld, with 59 per cent of those seeking recompense being awarded compensation. This has hit the company hard, being the main source of their difficulties in the UK market.
How will this affect customers? While QuickQuid’s UK operations will likely need to begin to cease, customers need to recognise the obligations they have to fulfil their loan agreements to the company. Avoiding payments voluntarily or involuntarily will result in additional fees, charges and penalties, as well as affecting an individual’s credit rating.
Those seeking redress from the company over their objectional lending practices are advised to wait for further information from the firm before taking further action. It is possible that claims may not be awarded until Grant Thornton have wound up UK operations.