The erroneously titled Payday Loans are for the desperate and the desperately unwary.
If they were only for the short term to tide borrowers over till next payday this would be bad enough, with interest rates quoted for most expensive at 5,800% to the 10th most expensive at around 2,000%, but many clients don’t have a job or even the means for pay-back.
The so-called industry turns over £2,000,000,000 (Billion) per annum. Around one million households take on these loans every month. One in four of these loans are not paid back within the stipulated time. The result is they are rolled over into yet more debt. Citizens Advice says that 90% of lenders are not checking whether these debtors can repay before they roll-over a loan -- despite the fact that such lenders agreed to do this in last year’s code of conduct. It is actually worse still, in that lenders have been using an Automatic Payment System, set up over the phone, allowing the lender to access debtors’ bank accounts to see if they have money there for repayments, and if so peremptorily take the cash due.
We surely now must realise that politicians, their quangos, and all the rich pontificators on committees, have no idea about what goes on at ground-zero level for the poor, without money in the bank, credit and debit cards all checked out, and no idea who or where to turn to just to survive. Many of the not so savvy and the innocent poor are at their wit’s end and will jump at the chance of easy money as portrayed on TV adverts using old female dummies chatting about easy loans, many of which are allegedly paid back (no mention of interest) before the end of the month.
So we come to the question of what to do about it: who is going to do it; when is something going to be done, other than the great and the good mentioned two paragraphs ago saying the equivalent of Marie Antoinette’s apocryphal “let them eat cake”?
After years of inaction by the big political establishment playing their usual game of procrastination, what is the best they can come up with? A one day ‘summit’ on 1st July 2013, attended by ministers, regulators, CEOs of payday lending trade associations, heads of actual payday lending companies; consumer group organisations such as Which, Citizens Advice, Step Change; and persons from the Advertising Standards Authority, Financial Ombudsman Service, and Money Advice Service.
“The commissioned research into the effect of payday lending advertising on consumer behaviour is due to be published in the autumn”. (My comment is: and then what?)
However, “positive noises have come out of the summit”. (Whatever that may mean!)
Business Innovation & Skills is supposed to protect consumers and prevent businesses engaging in unfair practices. The Office of Fair Trading passes cases to The Competition Commission which is under the B.I.S. umbrella, and all are supposed to ensure ultimate benefit for consumers and the economy, while protecting the weak.
We will have to wait till April 2014 for the merry-go-round to come to another temporary halt, because at that date the responsibilities of The O.F.T. and The Competition Commission will be passed to the new sleeping watch-dog:
- - The Financial Conduct Authority
So what sticking plasters to cover the wound have been proposed?
The Institute for Economic Affairs warned that restricting payday loans would “hit the poorest hardest”. D-oh-oh-oh!
Others have said that “shutting down these necessary short-term loans could force people into the hands of illegal loan sharks”. Legal ones are OK then?
“A cap on the total amount it is possible to borrow”. Peoples’ needs are different. At what point would such an arbitrary cut-off come?
“The Government is working to promote better alternatives, such as Credit Unions.
We have committed to invest more than £38 Million in Credit Unions, which will save people on low incomes up to £1 Billion in interest repayments”.
This is all complete wishful-thinking. Credit Unions comprise people of like minds, needs and cooperation where money is both saved and lent. This type of financial cooperative is owned and controlled by its members. The cooperative principles have nothing to do with Governments. So our Government, which has no money of its own and is deep in debt, is going to put £38 Million into Credit Unions (plural). We have already been made aware that the payday sharking business is worth £2,000,000,000 (Billion) a year and therefore even if the £38,000,000 (Million) could somehow be used to filter down to the needy, the maths tell us that would provide only 0.019% of the money needed. Furthermore, how they calculate a saving of £1 Billion in interest payments is ‘a riddle wrapped in a mystery inside an enigma’.
Only slightly more helpful to the cause would be using The Money Advice Service.
It is more usually giving advice to those who have some money and how to manage it for savings and pensions in retirement. Not very helpful!
To end this piece on financial jiggery-pockery, the only option open to me is to make mock of it, as Charles Dodgson did as Lewis Carrol.
“The rule is, jam tomorrow, and jam yesterday – but never jam today” – The White Queen in Through the Looking-Glass.
My own contribution is:
The Payday Quadrille
Will you pay a little faster said the lenders to the goats
There’s a loan shark close behind you, and he’s got you by the throats
Will you, won’t you; will you, won’t you; won’t you join the scam
Too far, too much; too far, too much; so far, we can’t pay soon
We’re already down and out; now howling at the moon.