Though the online loan industry has been justly lambasted for a variety of sins against some of the most vulnerable consumers, it has cleaned up its act considerably in the past few years, particularly in the UK where regulators have worked steadily to make things more fair for borrowers. Accordingly payday loans are a better option than they were in previous years for borrowers who need a relatively small amount of cash and can pay it off in the allotted time (usually one month).

And contrary to common stereotyping, not all borrowers who turn to payday loans are in desperate circumstances. Some simply need money for unexpected expenses, and some even use payday loans to fund business borrowing. All things considered, the payday loan industry has become considerably more mainstream and “respectable” in recent years.

Spotlight on improvement

One encouraging sign is that YouGov BrandIndex UK named payday loan giant Wonga as one of the most improved UK brands of 2015. Granted, Wonga still failed to reach a positive overall rating, in great part due to its widely-publicised slip into a loss due to being made to write off £220 million in outstanding loans that were made without first qualifying whether the borrowers could actually afford to repay them. That said, Wonga was able to add 11.4 points to its score, which is decidedly a step in the right direction.

The fact that five of the UK’s 10 most improved brands were financial institutions indicates that lenders that are in compliance with recently-revised borrower friendly regulations are continuing to regain consumers’ trust. And the industry continues to evolve as new players come into the picture, though not everyone is in agreement that all of these players are necessarily helping to change things for the better.

Is poor the new middle class?

Subprime lender Elevate Credit made the news recently for being “the first tech IPO of 2016”. Elevate has called its customers in the US and the UK the “New Middle Class”, but it offers high-interest loans for people with few other options – and many of those folks are only marginally middle-class and struggling to stay out of poverty. Some observers have called Elevate “the new face of payday lending”, even though in the UK, where Elevate operates under the name Sunny, the loans currently offered are instalment loans of six to 14 months. That could all change; Elevate’s future as a provider of consumer loans in the UK will be decided by 1 April 2016.

In any case the criticisms of Elevate will sound familiar to anyone who knows the history of the payday loan industry. Specifically, critics are expressing concern that Elevate appears to be less scrupulous than traditional lenders when it comes to ensuring that borrowers can actually afford to pay off the loans they receive.

Yet Elevate seems to be attempting to distance itself from the payday loan category, going so far as to declare that unlike many payday lenders, its fees are all transparent. This may be true, but front-end transparency does not tell the entire story. The funding for the company’s loans involves what Financial Times blogger Kadhim Shubber calls “a complex web of financial engineering”.

Given all of the above, market watchers have their own reasons to err on the side of caution where Elevate is concerned, but as always it is consumers who need to be particularly cautious, no matter which lender they choose. Though the payday/bad-credit loan industry has improved over the years thanks to regulatory intervention, one reality has not changed: People with an urgent need for cash and a spotty credit record simply don’t have as many good options as those who are financially sound, with one inevitable result being that they pay significantly more for the ability to borrow than their more affluent counterparts. For example, loans made by Elevate charge an average interest rate of 176 percent, lower than what some payday loan services charge, but still a burdensome amount especially for customers who can ill-afford it. But borrowers do still have choices. That’s why it is vitally important for every borrower to carefully research all options and read the fine print before taking out any type of loan.