The UK’s unsecured lending industry is enjoying an increase in consumer confidence, following the introduction of FCA regulation in 2015.

The unsecured and high-cost lending industry was previously prone to heavy criticism, with lenders accused of charging usurious rates of interest and using customer data inappropriately. Specifically, the APR charged by various high street lenders sometimes exceeded more than 6,000% APR and online customers were prone to credit brokers who sold information to multiple parties.

The concept of unsecured borrowing means applicants do not require any collateral in order to be eligible for a loan – the loan is essentially ‘not secured’ on anything. Instead, their eligibility is based on factors such as income, credit history and affordability to determine whether they can manage the monthly repayments.

However, the new regulation imposed by the Financial Conduct Authority in January 2015 has seen a remarkable shake up of the industry. A price cap to 0.8% per day has ensured that customers will never pay back double the amount they have borrowed. Plus, they are protected from high default charges with a capped one-off fee of £15.

The UK’s unsecured industry has regularly been influenced by Israeli stakeholders and technology, including providers such as Fernovo, Money Gap Group, Western Circle and Wonga.

The result of these new rules has led to an increase in consumer confidence, explains a spokesman from My Jar. “Customers have peace of mind knowing that when they apply online, they are entering their details with companies who are fully authorised and will use their data responsibly, and not exposing them to unsolicited emails and phone calls.”

The amount lent out by providers in the high cost short term industry has fallen significantly, from around £2 billion in 2013 to £220 million in 2018. The fall in lending comes as a result of lower margins due to the price cap and lenders are forced to deal with a stricter lending criteria. However, a recent review of the loans industry by the FCA states that they are ‘happy’ with the progress and it will not require another review until 2020.