Trade Associations and The Good Practice Customer Charter

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The Good Practice Customer Charter was unleashed in late November 2012. It was a joint proposal between 4 of the most well known trade associations. This included the BCCA (British Cheque and Credit Association), the CCTA (Consumer Credit Trade Association), the CFA (Consumer Finance Association) and the FLA (Finance & Leasing Association). This Charter is in place for anyone who chooses to use or is already using a payday loan or short term loan that is a member of any of the noted 4 trade associations. Any such lender with membership will be committed to a set of key commitments that provides further protection to the customer. Lenders that carry membership should provide a free PDF that provides all of the necessary information regarding the benefits involved.

One interesting point was in informing the customer of how the loan works and the total cost per £100 borrowed. I have always presented examples of costs per £100 myself as this is an easy way to calculate the costs involved that can also be simply translated as a percentage. For instance, £30 per £100 would simply work out at 30%. When lenders display APR figures, this has always been a misleading figure to use that people tend to throw around complaints with APRs standing in their thousands. APR is a useless figure for a payday loan since it is an annual calculation that factors compounding. It is useful when perhaps comparing credit cards, but it doesn’t really tell us much about the cost of a payday loan.

A displayed calculation per £100 that lists the interest cost and any association transfer fees is certainly a good move on their part. A notable ruling was to freeze interest and charges if you make repayments under a reasonable repayment plan or after a maximum of 60 days of non-payment. Many of the points within the Charter were toned down though and wouldn’t make much of a difference. In regards to trade associations, if a lender does carry membership then they will be following a code of conduct. Such policies have never been strict though and some of the biggest customer service complaints that I have studied arise from lenders that do hold membership. To become a trade association member, a lender typically has to pay an annual fee.

Most of them hide the costs involved, but one such trade association does quote annual figures that stand in the thousands. The benefits of membership generally sway towards improving the reputation and trust that any such lender will have from the association (displayed badge). No lender is ever forced to join one, but most of the leading payday/short term lenders hold membership. The Good Practice Customer Charter is a refreshing update that has been designed to support the customer, although it is by no means perfect. You have to remember that payday loan debts have reached an all time high in 2013 based on data from the UK’s leading debt charities. The Charter trade associations as noted includes the BCCA, the CCTA, the CFA and the FLA.

The CFA is notable since they are used by major payday lenders such as Payday UK and QuickQuid. The BCCA is very popular and is used by such lenders as 247Moneybox, Lending Stream, Speed e Loans, Uncle Buck etc. The CCTA is also popular and is used by Cash Genie, Mr Lender and Swift Sterling. The FLA is the least popular, although they happen to have Wonga. Those are just a few examples, but you will find that a high percentage of lenders do hold membership with someone. More trade association content focus will arise here soon as it is important that the customer is fully aware of their protection and rights. The Good Practice Customer Charter is a good step forward, but improvements can always be made.