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American payday loan lender set to conquer uk market

22nd April 2011

American payday loan lenders have seen an opportunity to expand in the UK. As more and more Britons fall victim to debt, US companies are set to take advantage of the situation with competitive 30% interest rates. Just one company alone has told investors that it aims to quadruple its presence in the UK. This will be done by opening up to 800 new stores across the country.

The worry is that these large American lenders will cause poorer families to become trapped in a cycle of debt. America already has a problem with debt and it looks like they are aiming to do the same in the UK. Their main targets are said to be those who were affected by the recession.

Though the payday loan is popular in America, many states have actually passed laws that cap the interest of lenders. There are also laws that limit the amount of payday loans that a consumer can borrow from a lender.

In the UK there are a number of payday lenders who are growing in popularity. Wonga.com is just one of them. After just a few months in business, the company was used as a sponsor for Blackpool, a premier league football team. However, while it is one of the most popular lenders in the UK, it is still quite a small business. When the bigger American companies start expanding in the UK, they are going to put a lot of pressure onto smaller lenders such as Wonga.com.

Dollar Financial, a US loans giant, has just bought out PayDay UK. The company already has 370 Money Shops within the UK. Now the goal is to reach 1,200 locations. Jeffrey Weiss, the chief executive of Dollar Financial, has stated that the UK is a prime market for payday loans. The UK is considered to be unregulated in comparison to the US. He comments:

“I think we’re maybe 25% of the way towards a full country build-out in the UK. That includes having large stores in highly dense areas and, an area we really haven’t moved to yet, smaller stores in more rural areas. If you extrapolate from our current 350 stores, I think there is a potential universe for us of 1,200 locations.”

In America the average consumer takes out around 10 payday loans each year. There are some campaigners who claim that payday loan lenders are encouraging repeated borrowing in order to boost their profits.

Uriah King from the Centre for responsible Lending in North Carolina, states:

“If you go to the website of every payday loans company they stress that this is a short term mending to meet a one off need. But in private, these companies are telling their investors different things. It is a system designed to trap borrowers.”

The popularity of payday loans is definitely worrying UK debt consumer groups. As larger American companies expand to the UK, it is only set to cause even more debt problems. Many people would like to see the UK place capped interest rates on all payday loans.

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