The FCA brought in strict rules in 2015 to protect people from unfair lending and high-cost credit. This has helped to rebuild trust in the market, especially after the collapse of payday lenders like Wonga, which offer high-cost credit at interest rates that often exceeded 6,000% APR with limited affordability checks.
Since the FCA took control of consumer credit, lenders have had to follow much tighter rules. This includes checking if a borrower can afford to repay a loan, being clear about the cost of borrowing, and treating customers fairly if they struggle with payments.
These steps have made a big difference. In fact, complaints about payday loans have dropped by more than 80% in the past five years, according to the Financial Ombudsman, showing that many of these rogue practices are no longer common.
Today, many borrowers feel more confident when taking out a small loan, such as £300 or £400, to help them through a tough patch. With the ongoing cost of living crisis, more people are turning to short-term credit to cover basic needs like food, rent, or utility bills.
Having access to safe, regulated credit is more important than ever. A recent survey showed that 60% of UK adults said they would consider using credit to manage an unexpected expense, but only if they trusted the lender.
Based in Wakefield, Yorkshire based lender, One Stop Money Shop explains: “While this new level of safety in the market is good news, it has also come with some changes.”
“There are now fewer lenders in the market, and loans are harder to get if you have a poor credit history. This means some people still struggle to find affordable options, and may turn to unregulated lenders instead. But for those who can access it, the loans on offer today are much fairer and safer than before.”
“You can certainly feel safer using a high street lender or personal lender that you find online. In the past, you may have been attracted to flashy marketing and repayment plans that would encourage revolving credit - but these practices are no longer in play. Today’s products are also longer term which helps to ease the financial stress.”
“If you cannot access funds from a direct lender, you may consider low cost alternatives and using local credit unions, which are designed to accommodate those from all credit backgrounds and have no repayment penalties in place.”