Before deciding to take on an online short-term loan, you should ensure that the company you’re lending from are properly regulated. The Financial Conduct Authority (FCA) is a financial regulatory body within the United Kingdom, who are the conduct regulator for 56,000 financial services firms and financial markets in the UK. They are also the prudential regulator for over 24,000 of those firms. Their aim is to regulate financial firms and services in a way that adds the most benefit to those who are seeking and using financial services.
In January 2015, the FCA introduced a price cap, enforcing online lenders to limit what they can charge, and ensuring that they undertake affordability assessments, as well as making these service providers become more transparent with the true cost of their credit.
The financial provider should clearly outline what they expect from you, and their own lending codes for all customers. These codes should highlight their key commitments to you, and provide clear information about how the loan works; including any APR, and charges that may be incurred as a result of missed or late payments.
There should be a way to contact the service provider, and this should be clear, and visible. They should explain how they will be contacting you, and how you can contact them; whether this is for questions, complaints, or any problems that may arise during the loan application process.
When searching for a provider, you should be looking for a company that acts reasonably towards you. It’s prudent that they comply with all relevant legal requirements, and regard rules and regulations with the utmost care. All promotional materials, including any advertising or images they have on their website, should be clear and concise. Misleading material is not a good sign, and if you think something seems off, contact the company, and look at reviews and listings before you start the lending process. A company should not pressure you into taking out a loan with them.
Responsible lenders will inform you that a short-term loan should only be used for short-term financial needs, and is not appropriate for long-term borrowing, and should not be used if you are in financial difficulty. They will check if the loan is suitable for you, paying specific attention to your current circumstances, and they will assess your current financial situation (including your income, past financial affairs, and credit references and scores, among others) to ensure that it would be appropriate to lend to you. They will also check your identity, using the information and any documentation you provide. Lenders should adhere to data protection, and follow all relevant privacy and data protection laws; this includes not revealing your information to anyone, unless they have your permission, or are required to by law.
One such lender that is authorised and regulated by the FCA is PiggyBank, who have also taken it upon themselves to follow key issues outlined in the Customer Charters and Lending Codes of several financial associations and services.