It’s good to know that we’re all in it together, as David
Cameron and Nick Clegg keep reminding us. However, I don’t suppose that they’ve
ever been in a position where, at the end of the week, the coffers are
completely empty and there are urgent bills to pay or food to be bought. Yet,
in the current economic situation, more and more people - especially as
low-income working families discover the real impact of benefit cuts – find
this is the reality.
Our TV screens are filled with those adverts from
companies who are only so, so willing to provide a quick loan to tide us over
until the next wage packet comes in. The sharks have arrived. The temptation is
enormous.
In 2006, the payday loans industry was worth about
£350,000 a year; last year, it had increased to more than £2bn. Interest rates
can be 4000% and more. Nearly half the people taking out payday loans are doing
it to pay off another debt – usually one with a vastly lower interest
rate.
A year ago, I called on the government to take urgent
action to cap interest rates on loans. Bluntly, the whole business is just
obscene. But, I’m sorry to say, the government has refused to act. The Office
of Fair Trading has done a few spot investigations on some lenders about loans
being given without checks being made about the ability to repay. Wonga – the
biggest shark - was censured for employing “aggressive and misleading” debt
collection practices. But that isn’t the real issue.
Even the Channel Islands have refused to issue banking
licences to these payday lenders. So, why isn’t this government acting? Well,
it doesn’t look good that Wonga was paying the Conservative Party to meet
government ministers last month. And Adrian Beecroft, who earns millions in
dividends from Wonga and donates some of those to the Conservative Party, was
the person commissioned by David Cameron to recommend that protection for
workers from unfair dismissal should be lessened. And now we learn that one of
David Cameron’s key advisers has left to join Willy Wonga’s money-making
factory. Bluntly, it smells.
The only good news on these issues is that UNITE, the
trade union, is actively exploring expanding the ability of credit unions to
offer short-term loans at low interest rates.
However, I repeat some simple advice for people who might
be tempted by a payday loan:
“Don’t do it. Don’t even think of doing it. If you’re
struggling with debt, go to your local CAB now before you do anything else.”
