The spread of Covid-19 has changed our society – and societies across the globe – beyond recognition. All but essential travel is banned, workers are facing furlough, unemployment or long periods of home-working, the health service is under greater pressure than ever before and South Africans can’t even buy a pack of beer to help stave off all the anxiety!
Everywhere you look, things are radically different and under constant, ongoing review. This includes the world of online lending…
Although South African authorities have not announced clear changes to the rules surrounding online short term lending, many countries have already done so. In the UK, for example, the Financial Conduct Authority (FCA), released a list of new guidelines for payday loan providers and customers to follow during the Covid-19 pandemic. These new regulations include the option for one month payment and interest freezes and calls for lenders to work flexibly with struggling customers affected by Covid-19.
How online lenders are affected
Changes to online short term lending go beyond new regulations enforced by external bodies. Across the world, online lenders have had to dramatically change their businesses and review their practices. From closing down call centres, to completing more stringent affordability checks, different online loan providers have been forced to adopt a range of new practices and approaches. Well-known online lender Wonga’s recent Covid-19 announcement, for example, stated: “…to ensure that you have access to short-term funds that you may need now without getting caught in a lengthy repayment period in the future […] we will be limiting the maximum term on all our loans”.
If you are considering taking on an online payday loan during Covid-19, you may encounter the following changes to service:
- Shortened loan terms – A number of online lenders, like Wonga, have reduced their maximum loan period. This means that longer loans will be temporarily unavailable to borrowers during the Covid-19 pandemic. Unprecedented levels of economic uncertainty (at a personal, corporate, national and global level) are behind this change in approach. The uncertain outlook makes it extremely difficult for lenders and would-be borrowers to know whether repayments will be possible next month – let alone in 3 months’ time.
- Stronger affordability checks – Many online lenders have implemented more rigorous affordability checks. With employment now extremely unpredictable, a payslip from last month is a much less dependable measure of a customer’s ability to repay a loan. As such, many lenders now require applicants to upload a clear image of their latest payslip and will no longer accept bank statements alone as proof of income.
- Call centre closures
Whether you are considering making use of an online loan, or already have a loan, be aware that communication with lenders may be slower than usual during Covid-19. This is because many providers have been forced to close their call centres to adhere to social distancing regulations. Many lenders are now offering an “online only” service, which means customers can only contact providers via email or live chat services.
- No lending
Some online providers have paused new loan services altogether. In many cases, these businesses state that they are focussing the entirety of their resources on their existing customers. This is often due to high demand on online lenders from customers who need support after finding repayments unachievable as a direct result of Covid-19.
Are you concerned about missing repayments as a result of Covid-19? Remember, it is vital that you contact your online loan provider as soon as possible to discuss your difficulties and attempt to arrange an alternative repayment plan.