Tag Archives: payday loans

Payday Loans

I feel quite pleased that Wonga went into liquidation. I am sad for their employees (as we all have families to support) but I am sure the directors will walk away with their egos bruised and millions from ill-gotten gains. Companies like Wonga are effectively no more than legalised loan sharks.

Looking at a quick comparison between payday loans for short-term loans the APR varies from 500 per cent to just under 1600 per cent a year. A survey by the Royal Society for Public Health ranked payday loans as having the most detrimental effect on mental health well-being. There are nightmare stories of people who have up to 8 payday loans to service their debts. On average people hold three payday loans at a time. Agencies that support and assist people with payday loans relates to loans that are over 100 million pounds for well over one hundred thousand people. Those in poverty already pay a poverty premium (the poverty premium is calculated to cost a low-income family on average £490 a year) therefore reducing costs from any spend is crucial for them as it allows more cash in their pockets. Increased inflation and low wage increases hurt low-paid families disproportionately and they are the ones most likely to use payday loans.

We can learn from the US here; fifteen states have banned payday loans. Although, in the UK, we have capped loans I for one would be in favour of a similar ban. However, we need to tackle payday loans, excessive credit card rates and charges from unauthorised bank overdrafts (I remember that at one time a large high street bank was changing equivalent to 4,500 per cent APR for an unauthorised increase to an overdraft). Limiting the harm payday loans can do is now even more important because of increased wealth inequality and a shrinking welfare state.

Posted in News and Op-eds | 26 Comments

Opinion: Are payday loans impoverishing our neighbourhoods?

There is a central moral conundrum at the heart of the payday loan phenomenon.

It is that payday loan companies are designed to help people through what are intended to be unusual and temporary periods of financial difficulty.  Long-term and repeated use of payday loans is seriously expensive.

Yet – and here’s the rub – the business plans of most payday loan companies envisage growth.  Their business purpose, and the purpose of their investors, is to maximise their profits – and this is bound to be at the expense of some of the poorest families and the most vulnerable places.

My report for …

Posted in Op-eds | Also tagged and | 25 Comments

Opinion: Tackling debt problems in our communities

payday londonMuch attention has recently been given to the growth of payday lending and with very good reason.

In the first quarter of 2009/10, across the UK, just 1% of Citizens Advice Bureau debt casework clients had at least one payday loan.  But by the same quarter of 2012/13 the figures show 10% of their debt casework had at least one payday loan.  Similarly, in November 2012 the debt charity StepChange reported that the proportion of their clients with payday loans had soared, from 3.7% in 2009, to 17% in 2012.

This growth in incredibly expensive debt is of course the legal end of the market.  We should never forget that on top of the growth of payday lending there has been a growth in illegal lending by loan sharks.  To give some indication of the growth of loan sharks it is worth noting that research from Liverpool John Moores University suggests that one in twenty low-income borrowers in London, that have been refused credit,  have then turned to a loan shark.

Posted in Op-eds | Also tagged | 6 Comments

Vince Cable justifies the payday loans cap – and the intervention by the Archbishop of Canterbury

vince-on-newsnightAccording to the Independent today, George Osborne’s surprise decision to impose a payday loans cap was precipitated by a threatened revolt by the Archbishop of Canterbury. Archbishop Justin Welby had been planning to speak in favour of an amendment to the Banking Reform Bill today, which would have imposed a 10% cap. The amendment was expected to attract support from cross-benchers and would probably have inflicted a defeat on the government.

The Independent claims:

Vince Cable, the Liberal Democrat Business Secretary, and Jo Swinson, the Liberal Democrat minister responsible for consumer affairs, have both

Posted in News | Also tagged and | 4 Comments
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