Lenders Now under the Watchful Eye of the EU
If you have ever shopped for credit cards and loans, you will know what a difficult process it can be. Decoding Annual Percentage Rates (APRs), interest rates, rates and charges can be a complete headache however as of February 1st 2011 new Eu laws were enforced to help make the act of borrowing better to fathom plus the costs of financial products a lot more honest.
Regulations
While features from the directive are already part of UK law, the newest addition came in the form of the Consumer Credit (Advertisement) Regulations 2010; a modification of earlier credit marketing and advertising rules
Focussing on transparency and consumer rights, the new directive will ensure lenders are more truthful with their clients. Now governed by stricter advertising regulations, any time an APR rate is presented, credit providers will be made to include ALL loan costs and hidden charges in what is referred to as a ‘representative example’.
The term ‘representative example’ refers to a collection of EU standardised, comparable data which enables customers to see a sample credit amount, the percentage rate of borrowing, any additional costs and the representative annual percentage rate (APR) – a very important change to come from the brand new legislation.
Because credit is subject to customers’ credit ratings and own circumstances, finance companies have been able to charge various APRs for the same credit product. With representative APR, the EU aims to prevent this process and from now on requires loan companies to come up with an annual rate that contains all charges and is also representative of the rate that 66% of past clients paid (in the last 12 months) and what at least 50 percent of new customers can expect to be charged.
In plain English please…
The new directive might seem tough to get your head around but really, there are only 3 important things you need to understand.
1) It will be tougher for loan providers to con customers
Consumers are now able to identify rip-off loan providers who are incorporating additional charges, and this is all credited to the representative examples and the representative APR now being required to be uncovered, legally.
2) Browsing for loans is faster and simpler
With APRs now including all prices and all the details laid out in the representative example, consumers can easily see clearly and quickly exactly what the total price of a loan is going to be. This new level of transparency will offer customers (and business competitors) a new level of comparison that will allow them to easily shop around for the right credit product suitable to them and their individual circumstances.
3) Consumers will benefit from a better legal standing
The brand new directive makes the legal rights for customers much better.. After signing into their credit contract, people will now have the ability to pull out from the agreement within 2 weeks without the need to give a reason and, maybe best of all, at no charge. .
In addition, in the past consumers had only been allowed to repay earlier than agreed, the full amount outstanding on a loan, but the new legislations now allow customers the right to make early, partial payments, in order to clear the amount quicker.
For too long customers have been kept in the dark in regards to finance products but these new changes will mark a new pattern of borrowing and loaning. The directive and its improvements will promote a new generation of responsible lending and will help people be in a position to make well informed choices in regards to their financial situation
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