20 Comments

• Jennie 30th Dec '13 - 8:55am

  interesting differentials. Am happy to tell people how I voted: useful service Yes, unethical Yes, people capable of deciding for themselves Yes, should be regulated Yes.

  I see no contradiction in those answers. Payday loans COULD be a useful service and perhaps possibly ARE for some people. However add the companies are run at the moment they are unethical and exploitative.

  The third question is the one where I think the wording was crucial to my answer. Poor people are not STUPID, they are CAPABLE of deciding, they are just trapped, and when you need to eat NOW the consideration of interest rates etc takes a back seat. And of course the vast majority of payday loans are used for essentials. If it had been worded otherwise I might have voted with the majority.

  I voted Yes to regulation on the simple expedient that it’s the lesser of two evils. I’d rather we sorted out the extreme poverty that makes regulation necessary, but I’m under no illusions that that is at all likely.

• Colin Green 30th Dec '13 - 9:12am

  I quite agree Jenny. Pay day loans can be useful in difficuly circumstances but it is far too easy to get into a whole lot of trouble.

  The problem is that if you can’t afford to pay for something this month, the chances are you won’t be able to afford it next month either. The excessive charges only build when you roll over the loans. It would be better if short term loans were paid back over a few months without the excess charges.

• Colin Green 30th Dec '13 - 9:13am

  Sorry, Jennie (not Jenny)

• Joe Otten 30th Dec '13 - 9:35am

  I voted with Jennie on 1-3 for much the same reasons. I forget how I voted on 4 – there is no problem with regulation in principle, but it is intrinsically expensive to lend into this market, so any cap would be quite high (and therefore barely effective) to avoid driving the payday companies out of business, and their customers into the hands of loan sharks, about whom, let’s remember, “unethical”means they will demand repayments in perpetuity or break your legs.

• Jennie 30th Dec '13 - 9:36am

  Colin yes, I grasp that, but if you’re hungry now the prospect of starving is more immediate and pressing than interest charges which will apply in a month.

• Andrew Emmerson 30th Dec '13 - 9:45am

  It hurts my liberal soul that so many Lib Dems believe people who access pay day loans are too stupid to decide whether they’re getting a good deal or not.

• Peter Watson 30th Dec '13 - 10:15am

  I agree with comments above, and it strikes me that “58% say people who take out payday loans unable to decide for themselves if the terms are attractive or not” and “By 56% to 30%, Lib Dems DISAGREE that payday loan companies offer a useful service” says more about Lib Dems than it does about payday lenders. It suggests a party whose members have a condescending attitude towards those who need such loans, and who cannot comprehend what it is like to be so short of money that such a loan is useful.
  For what it is worth, I would be much happier if more members had answered in the same way as Jennie.

• Colin Green 30th Dec '13 - 10:19am

  Jennie, Yes, I get that. But by restructuring short term loan repayments over a few months, rather than the current rolling over of one month loans, you cut the interest cost by perhaps two thirds. The choice then is not between going hungry and a massive loan in the future, but between going hungry and a manageable loan that won’t balloon out of proportion.

• Paul in Twickenham 30th Dec '13 - 10:43am

  The context sensitive pop up on this page has given me an ad for. .. A loan company! They are offering to loan me £850 to buy a car with 78 weekly repayments of £57.68 for a total charge of £2471.68 at an APR of 491.36% secured against the log book of the car. In what parallel universe is this not usury?

• Paul in Twickenham 30th Dec '13 - 10:53am

  Actually as I posted my previous message I realised that the multiplication is wrong as 78 X 57.68 is 4500. But that’s what appears on my mobile – the arithmetic in their “representative example” is completely wrong. However on the desktop website it gets the multiplication right and it’s £31.69 for 78 weeks totalling £2471.82. Still 491% APR, still secured against the log book.

• Dave Page 30th Dec '13 - 11:25am

  Yeah, I find this kind of disappointing myself. One question for the majority who don’t think payday lenders offer a useful service – what do you think the people using payday lenders would do if they didn’t exist? Local independent financial consultant Honest Ron Kneebreaker would be getting a lot more business, I suspect.

• paul barker 30th Dec '13 - 12:05pm

  The problem is that if we say that most users of these loans either cant or wont “decide for themselves” then we are reclassifying a big chunk of the adult population as children. Thats fine for Labour types like Peter Watson but is it acceptable for Liberals ?

• Eddie Sammon 30th Dec '13 - 12:37pm

  Government imposed interest rate caps will just limit competition. It’s not the liberal way to do things and if I don’t want price caps on my business then I shouldn’t ask for them elsewhere. I don’t like the precedent it sets. Lower interest will also encourage people to take out more debt.

• johnmc 30th Dec '13 - 12:38pm

  I suspect this says as much about the perspective of the members polled as it does about those using these services!
  An interesting question might have been ‘have you ever had to obtain a payday loan’.
  There is always a danger in these matters of patronising or iconising the desperately poor, the only people who don’t are probably in that category themselves. Some will make poor decisions, some will not.

• Peter Watson 30th Dec '13 - 1:30pm

  @paul barker “Thats fine for Labour types like Peter Watson but is it acceptable for Liberals ?”
  I’m not sure what you’re saying here, so perhaps you misread my comment. I agree with Jennie, and apparently I disagree with the majority of Lib Dems who seem to believe condescendingly that the poor can’t decide for themselves. It is the Lib Dem types who are “reclassifying a big chunk of the adult population as children”.

• Geoffrey Payne 30th Dec '13 - 2:53pm

  I strongly object to this guilt trip argument that if I think that Pay Day Loan companies are ripping people off that I am blaming the victims for being stupid.
  The Lib Dem membership happens to be in line with the general public opinion; http://yougov.co.uk/news/2013/08/01/times-up-payday-lenders/

  If you fail to pass an exam in mathematics, does that make you stupid? If you fail all your exams does that make you stupid? If you fail all your exams, are you likely – in general – to be anything other than unemployed or low paid?
  I would never say that anyone is stupid, because I do not think there is a simple definition of what is stupid or what is intelligent. Someone might fail all their exams, but be a very intelligent football player for example. Intelligence can be measured in many different ways. Schoolchildren who are disruptive often want to wind up the teachers, and show remarkable intelligence in their ability to do just that, even if they fail all their exams.
  I do think that that if you have a low understanding of mathematics, then you may well not understand interest and why Pay Day Loans are a rip off, especially if you use them on a regular basis. I believe these companies exploit this by the way they advertise their services. They show benefits of getting a loan, and not the price you pay for having one. They want your custom of course. If the customer was rational I doubt many of these companies would exist. Indeed if the consumer was rational, I doubt that much of the advertising industry would exist.
  Consumers are irrational and that includes me sometimes as well.
  For those who issue accusations of being patronising, perhaps they should make that same accusation to the private sector who have the odd belief that if they spend millions on misleading and irrational advertising that people will buy their products? Now that really is patronising. I hope if you have the authority on behalf of the company you work for to make these decisions that you will be taken in by such thoughts, even if your competitors are.

• Paul Robinson 30th Dec '13 - 2:58pm

  @johnmc: As a lot of the comments seem to be regarding whether we are being condescending, perhaps a good question would be “Do you personally know anyone who has taken out a pay day loan”.
  A study published today (http://moneyfacts.co.uk/news/loans/payday-loan-uses-revealed-amid-calls-to-ban-adverts/) seems to show that some people are using pay day loans to fund a night out drinking, or to pay a mobile phone bill; not quite the use of PDL that most people expect!
  It’s heart breaking to think that some people see these as their only choice. Good comment piece in the Guardian: http://www.theguardian.com/commentisfree/2013/dec/17/why-wonga-exist-no-one-on-left-asks.

• Eddie Sammon 30th Dec '13 - 4:43pm

  If payday loan companies are unethical then are supermarkets too? Perhaps this also illustrates the problems of shoving membership down people’s throats rather than trying to create a movement with a broadly clear vision for government.

• Peter Watson 30th Dec '13 - 5:40pm

  @Geoffrey Payne
  “I strongly object to this guilt trip argument that if I think that Pay Day Loan companies are ripping people off that I am blaming the victims for being stupid.”
  I think it is entirely consistent to believe that Pay Day loan companies are ripping off people who are not stupid. The link you provide shows most people believe these lenders take advantage of the “vulnerable” and were pretty ambivalent about whether or not “Customers can judge if the terms are attractive”. This is not the same as the survey above in which 58% of Lib Dem LDV members (or nett of 36% compared with 4% on the yougov page) believe that the borrowers cannot decide for themselves whether or not the terms of the loan are attractive. I believe that pay day borrowers would be capable of identifying more “attractive” alternatives if they had choices.
  “I do think that that if you have a low understanding of mathematics, then you may well not understand interest and why Pay Day Loans are a rip off. I believe these companies exploit this by the way they advertise their services. They show benefits of getting a loan, and not the price you pay for having one”
  I don’t entirely agree with this. A quick look at a couple of lenders’ sites shows they use examples or calculators to make it clear that e.g. if I borrow £200 for 28 days I will pay back £250. This is much more straightforward and meaningful than bandying about a.p.r. figures of 1700% and does not require much maths.
  I do not think that those borrowing from payday lenders are stupid, and I believe many or most know exactly what they are signing up to as far as the loan is concerned. It is other parts of their lives that can cause the problems, whether that is poor choices (e.g. getting into debt over things that some of us would not consider vital) or bad luck (e.g. circumstances mean that another emergency arises or pay day does not come).
  I do feel that people need some sort of protection, but I do not know what needs to be done. It seems much more complicated than simply regulating the loans companies, but that might be a good start, especially with regards to advertising. Would restricting this source of cash drive desperate people to worse situations? Would tolerating the status quo or reducing the costs/risks of borrowing mean that bad habits (for want of a better expression) become engrained?

• MatGB 30th Dec '13 - 8:11pm

  Colin, when I took out a payday loan (after I’d met but before I moved in with Jennie), my choice was simple.

  £40 parking fine payable within 2 weeks. £80 fine if paid next month after I’d been paid. £30 bank overdraft fee. 3 week payday loan of £40, repay £60 on payday.

  So, pay £30 to my bank, or pay an extra £40 on the fine, or pay a payday lender £20 (Wonga would only charge £15 today for the same arrangement BTW).

  Anyone that says they don’t provide a useful service has never been poor enough or desperate enough to need a legit sum of short term finance. I agree, completely, with Dave, for most of these peopel the only other option is an illegal loan shark.

  Do some people use them to carry over loans month to month? Yes, and they shouldn’t, that’s not what they’re for, but that’s a different problem to the need for short term, high risk, finance for people in need. I hope to never need to use such a service again. But I know that, if I do need one, it’s there for me.

  And that’s far better than most of the other alternatives.