Does the FCA have the measure of the payday loans industry?

It’s been a busy couple of weeks for the short term lending industry. With the announcement of the Financial Conduct Authority’s (FCA) plans for a January 2015 cap on all payday loans, to the Archbishop of Canterbury’s U-turn on his anti-payday loan stance (he now believes short term lenders like Wonga are a safer option than the potential alternatives).

With so much action on the short term lending front line, it’s worth taking a closer look at how the FCA are doing and whether or not their strong, radical changes to the industry are a step in the right direction. With the whole industry preparing for a heavy dose of regulation from the FCA, will their new remit in the industry improve the state and public perception of payday loans  or will the FCA prove as powerless as their predecessors the OFT?

A fresh start?

The FCA took over the regulation of the short term loan industry in April 2014, taking the reigns from the much slated OFT (Office of Fair Trading) whose scope was small, resources limited and reach short. With little bite behind its regulating activities the OFT was not equipped to handle the demands of the ever-growing short term finance industry. With this type of finance becoming ever more popular in the UK and with almost no real regulation in place to guide the conduct of the hundreds of short term lenders springing up, it was only a matter of time before calls for tougher regulation were answered.

And that’s where the FCA came in. The objective? Stringent regulation, applied quickly and firmly throughout the industry – laying a groundwork upon which the industry’s best providers can continue offering short term finance to borrowers who understand it, can afford it and want it. First on the slate for the FCA we have:

July 2014

  • Mandatory “risk warnings” on TV, online, email and text message advertising
  • Extra information for borrowers about where to find free debt advice
  • Capped loan rollovers (lenders can now rollover a loan just twice)
  • Capped CPA (Continuous Payment Authority) that means lenders cannot keep trying to access capital from customer bank accounts after their second attempt

January 2015

  • 0.8% cap on interested per loan per day
  • Caps on additional loan charges (thought to be around £15)
  • Caps that ensure no loan ever costs more than double the borrowed amount

Sorting the wheat from the chaff

Whether or not the FCA’s measures will be effective or wholly positive remains to be seen, but their firm intent has already scared many less scrupulous lenders from the industry. Before the FCA handover there were an estimated 210 payday lenders in the UK. In advance of the FCA’s rise to power, close to a third of these lenders fled for the hills, failing to apply for permission to operate. In this area at least, it appears that the FCA have begun to weed the true bad pennies from the world of payday lending.

A learning curve

With many of the worst offenders sent packing, the FCA now have time and space to start properly regulating the good side of short term lending. This is a learning curve and committed payday loan companies like Wonga have the opportunity to work in cooperation with the FCA to really get to grips with the product their providing.

This will be a learning curve for the FCA too, as the path they must walk is a new and untrodden one. Many industry commentators have already raised concerns about the upcoming caps of January 2015. Some think that, with stringent caps in place, lenders will need to be more cautious and risk averse, turning many more finance seekers away and into the arms of dangerous options such as loan sharks.

Practice makes perfect

Yet, although it will be a long road, this could well be a hopeful picture. The FCA and Wonga (with other lenders from the industry) are now actively working together to ensure high quality standards of lending. With this kind of cooperation evident, many feel confident that, with a strong wind, this body could certainly turn the short term lending industry into a strong, well-managed and transparent sector.

Do you believe the FCA will change the face of short term and payday lending? Do you believe they need to apply more forceful measures? Share your opinions and experiences with our readers below.



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Excess Inventory: Tips for Hosting an Online Inventory Liquidation

 Any business that is focused on selling products will eventually find themselves with too many inventory items that failed to sell — and in some cases, the items look as though they’ll never sell. Whether it’s because they’re an outdated model, old fashion or they’re not a popular ticket item, these excess inventory items are costing your business big in many ways.

 You pay to keep those items on-hand and naturally you paid to put them into your inventory; therefore, you need to get a return on that investment and that means hosting an online inventory liquidation. You already know the challenges of selling items that obviously didn’t sell before, but one of the best ways to make those outdated items appealing to buyers is through discounting. No matter what you do, don’t just toss that inventory away — find a way to maximize your return and minimize your losses.

Review Your Excess

There are some parts of your excess inventory that will be easier to sell than others. To make selling a little easier, break down your inventory into three or four categories, such as:

  • Sellable
  • Possible Sellers
  • Donation Pile

Items that are sellable are those that are likely to sell and are likely to encourage more customers. These are also items that you can maximize your advertising on, because you can offer a reduced price while showcasing the original price. Also, these items might be ones that outlet stores or even the manufacturer are willing to buy back from you.

Possible sellers are those that could potentially sell — if you reduce the price — or might be taken by an outlet or manufacturer.

The donation pile is for items that are unlikely to sell. While you might be able to sell off one or two of these items, it’s unlikely you’ll get much money for them (often less than a penny on the dollar). These might be better to donate to charities or thrift shops and you can use that donation on your taxes.

 Discount Slowly

While a heavy discount is standard in an online inventory liquidation, you need to discount slowly. Remember you’re trying to minimize your losses on this merchandise. Start by discounting your “sellable” items at 25 to 30 percent off and see if you get any bites. If you do, leave that discounted price in place. For your “possible sellers” you’ll want to start with a heavier discount, such as 50 to 70 percent just to get some traffic.

Wait and see if you get any attention or sales on your discounted prices. If items are selling, leave them priced as-is until the sales begin to drop off. Then, slowly discount your items more until selling picks back up and your inventory is cleared.

Advertise Aggressively

An online inventory liquidation should be considered a prime opportunity for aggressive advertising. You can get a lot of attention with liquidation prices and the more attention your site gets, the more potential return customers you can get too. Put some effort into marketing your sale and use words that attract money-conscious consumers, such as “liquidation sale”, “heavily reduced prices”, etc.

 Determine What Happened

If you’ve noticed you have an excess inventory or a large volume of products you’re including in your online inventory liquidation, you need to assess where you went wrong and why you didn’t sell those products from the start. Was it poor advertising? Were your products heavily marked up? Or perhaps you just purchased too many?

Find ways to avoid excess inventory in the future. While you can always use an online inventory liquidation to clear out old stock, it is best to sell your stock the first go around — and without heavy discount.




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Should I Take Out Life Insurance Policies On My Children?

For financial experts, this is a doozie of a question – there’s two different schools of thought and it tends to be a heated debate. While there are good points on each side, it’s good to know that child-size life insurance policies are wildly unpopular; according to the American Council of Life Insurers, only about 15% of all persons under the age of 18 have life insurance policies taken out in their name – a stat that hasn’t budged in over a decade.

Deciding which side to fall on – the pro or the con – depends on the situation. Why do you need to take out a life insurance policy for your child? The entire purpose of a life insurance policy is to replace income lost when the main income provider for any family passes away – children are never the main income providers.

Of course, there are situations that might steer a parent towards life insurance as a possible solution to quite a few, rare, problems or possible future problems. Let’s examine the arguments.


What are some of the rare situations where it might not be a bad idea for a parent to consider taking out a life insurance policy on their child?

When the Child is Terminally Ill

This is an unfortunate situation that is filled with hard choices – ones no parent should have to make and that are especially difficult to make during this time. The argument here is that grieving parents will often, in fact, experience a loss of income after the death of a child, but still need to make ends meet, or care for their other children. In this case, a small life insurance policy taken out on a child that may pass on at an early age could help offset that financial loss due to parents taking time off from work to grieve.

When a Life-Long Disability May Prevent Future Coverage

When a child picks up what will, or could be, a life-long disability at an early age, it automatically sets them up for future hardship with obtaining life insurance. Instead of letting the medical history build and letting the child handle obtaining that coverage after all of that, parents will consider taking out a whole life insurance policy on their child that can be transferred to their care when they come of age. Essentially, it’s a way to make sure they get some kind of coverage when they can and there happens to be quite a few programs offered by insurance companies for this very purpose that remain affordable throughout a child’s life.


What is the real purpose of child life insurance? Are there better alternatives than to essentially “abuse” the system and the very reason why life insurance exists?

There are Simply Better Investments

Here stands the main argument against child life insurance – there are better investments to be had. It’s not that the opposition doesn’t think grieving parents should have some kind of financial padding when a child passes away, or that a disabled child shouldn’t be set up for things they may not be able to obtain on their own down the line – after all, financial experts are all about planning ahead.

The opposition merely believes that a strategic investment in a 529, or some other financial strategy, will render better results, accrue interest that life insurance policies don’t or not much of, and can ultimately provide more for a family or for an adult child.

It’s an Abuse of the System

As mentioned, life insurance exists to replace lost income for a family that has lost their main income provider – this is essentially the definition of life insurance in its most black and white interpretation. Those that oppose child life insurance stand by this definition as their reasoning and it folds into the previously mentioned first argument.

Children don’t have dependents and they don’t provide income – therefore, they shouldn’t have life insurance policies.


It’s still up for debate – even long-term financial experts can’t come to an agreement. As you can see, there’s valid arguments on both sides and really it ultimately depends on what your situation is. No two situations are exactly alike, so there simply can’t be a cut and dry answer – which is why, there still isn’t one.

What are your thoughts on this sensitive subject?


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