Bank of Dave is back! But what happened to payday lending?

The Bank of Dave is back with a new Netflix sequel Bank of Dave 2: The Loan Ranger. This time, Dave Fishwick travels to the United States with a journalist and Citizens Advice counsellor to take on payday loan companies.

If you enjoyed the first film, you’ll know that Dave, a self-made millionaire, founded Burnley Savings and Loans in 2011 to help locals who had trouble getting loans from big banks.

The film is based on his real-life efforts to fight predatory payday lenders.

The real story behind the film

Dave Fishwick’s journey started when he discovered that payday loan companies were charging incredibly high interest rates, sometimes up to 5,000%.

This motivated him to take action, as he wanted to protect vulnerable people from being exploited by these companies.

Dave’s campaign contributed to a series of reforms, including the Financial Conduct Authority's (FCA) crackdown on payday lending.

What are payday loans?

Payday loans are short-term loans meant to give you quick access to cash before your next pay day. They can be as small as £50, but often come with very high interest rates.

The major risk with payday loans is that if you struggle to repay them, you might end up trapped in a debt cycle, where you need to take out new loans just to pay off the old ones. This cycle can spiral out of control very quickly.

The fall of payday lenders

Payday loan companies, like Wonga, became known for targeting vulnerable people with high-interest loans. Wonga, in particular, ran ads encouraging students to borrow money for things like holidays, which was heavy criticised.

In response, the FCA introduced a series of regulations in 2015 to protect borrowers, including:

• Capping daily interest rates at 0.8%.
• Imposing a £15 limit on default charges.
• Ensuring no borrower would have to repay more than twice what they originally borrowed.

These regulations forced Wonga to write off £220 million of debt for hundreds of thousands of customers. The company went into administration in 2018 and was fully dissolved in 2020.

Is payday lending gone for good?

While payday lending is now more tightly regulated, it hasn’t completely disappeared. You should still be cautious before turning to payday loans, as they can quickly lead to a cycle of debt if you’re not careful.

Borrowing responsibly

If you’re in a tight financial situation, it might be tempting to turn to high-cost lenders like payday loan companies or short-term loan services. Some options may seem like easy ways to get your hands on money, but can have drawbacks.

It's crucial to use them responsibly to avoid falling deeper into debt.

What to avoid

It’s best to avoid using payday loans, high-interest credit, or illegal money lenders – also known as loan sharks. These can lead to even bigger financial problems down the line.

Also be cautious with buy-now-pay-later (BNPL), as they can quickly get out of hand if you miss a payment, like our customer Junelle found out.

Calls for greater financial education in schools

The release of Bank of Dave 2 coincides with new research from Santander UK that shows a worrying gap in financial education. Only 26% of 18-21-year-olds say they were taught how to handle money at school.

This means about 4 million young people are missing basic money management skills.

What’s been missing?

The research shows a big difference between school lessons and the money skills needed in everyday life. Just 13% of students think what they are taught is useful for managing their personal finances.

Important topics like debt management and BNPL schemes are rarely discussed, leaving young people unprepared for the real world.

Social media reacts

The release of Bank of Dave 2 sparked conversations online, with many calling for more financial literacy in schools. 

One Instagram user wrote: “It [financial literacy] needs to be part of the compulsory curriculum, as far as I’m aware it's still not.”

Another posted: “People aren’t taught financial literacy in this country before they’re allowed to start taking out credit, it should be taught in schools.”

What to do if you run out of money before payday? 

If you find yourself running out of money before payday, you’re not alone.

One in four Brits face this problem, according to a survey by HR and payroll provider, Ciphr. This includes people in full-time or part-time work, as well as those receiving benefits and students.

If you’re caught short before payment, there’s plenty of places to turn to for help and stop-gap support, including:

• food banks
• food waste apps
• household support fund
• local welfare assistance (LWA)
• emergency grants
• credit unions
• budgeting loans

Read more about the different options if you find yourself broke before payday here.

Get free debt help

Sometimes, no matter how careful you are or how much you budget, your finances get on top of you.

If you find your debts mounting and can’t see a way out, speak to us for free debt help. We will find the right solution for your individual circumstances. Some solutions are free, others are paid for.