The BBC reported the other day that payday loan adverts have been banned from billboards and bus stops by Plymouth City Council, while Cheshire East Council has banned access to their websites from its computers.
Whilst it is true that payday loan companies offer small loans over short periods at remarkably high interest rates (APR's running into 1000's of percent), it should be remembered that the loans are available to people classified by mainstream "respected" banks as being high risk (eg low income, poor credit history with the likelihood of not being able to pay them back).
By denying such people access to a regulated, albeit high rate of interest, loan market Nanny is in effect pushing them into the hands of the loan sharks who are not regulated and who break legs in order to extract their debts.
People do not merrily skip and dance to these companies because they have nothing better to do, they borrow from them because they have literally run out of cash (by all means feel free to lecture them on the concept of "fiscal prudence" etc) and their only alternative is a loan shark.
Nanny is perfectly at liberty to ban payday loan companies, as and when she has in place a loan system that works for people whom the mainstream banks won't touch with a bargepole.
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I agree with you Ken.
ReplyDeleteI can understand why a young parent might go to a payday lender to buy their kid a pair of school shoes, rather than send their kid to school in shoes with holes in them for the week or two before they get paid.
I feel that Nanny's policy may well end up pushing the poor and vulnerable to loan sharks who are not regulated at all; growing up in 1950s/1960s East London I can remember the "Tally Men."
I think the media should also point out to our politicians who pontificate on such matters, that life is difficult for many that aren't on Nanny's payroll, or sheltered inside Nanny's bubble and who have to live in the real world. They should also point out that much of the so called interest rates, actually accounts for admin charges etc. The problem with a short term loan is that those charges are all front loaded rather than spread over months or years.