Payday lenders should be regulated

Companies like Wonga are currently trusted to regulate themselves, but that has to change.

On Monday Stella Creasy, the MP for Walthamstow, tabled an amendment to the Financial Services Bill which calls for the Financial Conduct Authority (FCA), the new financial regulator, to be given the power to set the total cost of credit that a lender can charge, rather than the self-regulatory model which currently exists.

Creasy’s amendment, which would be extended to clause 22, reads:

The FCA may make rules or apply a sanction to authorised persons who offer credit on terms the FCA judge to cause consumer detriment.

This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.

Andrew Tyrie, the chairman of the Treasury select committee, back in January this year viewed the creation of the FCA as an opportunity to improve upon the way in which the Financial Services Authority (FSA) regulated financial products.

However Tyrie did also warn that:

If we are not careful, the FCA will become the poor relation among the new institutions.

Many – Stella Creasy included – were hopeful about products such as payday loans being regulated "under one roof" by the FCA, but were concerned the authority didn’t have enough teeth to clamp down on irresponsible or predatory lending.

In many ways the FCA needs to challenge the "light touch regulation" of the day. The OFT's 2010 guidance for creditors on irresponsible lenders points out that credit commitments should involve consideration from the lender to assess a loan’s affordability to a potential debtor.

The FCA needs to do more than just assume a lender will do this assessment, particularly as rollover loans benefit it to the detriment of a debtor.

Moreover, we know payday lenders do not always make good on their promise to lend responsibly.

Wonga, the payday lender, who, it has to be said, recieves all the attention over far more dangerous lenders in the market, itself doesn’t always keep its word on responsible lending.

During an interview in March 2011 with the Guardian journalist Amelia Gentleman, with the opportunity to showcase some examples of, in Gentleman's words, the "web-savvy young professionals that the company believes it's catering to", Wonga decided to showcase Susan.

Gentleman writes of Susan:

She finds that with the cost of living rising, her benefits sometimes don't stretch to the end of the month, and has taken out loans with Wonga to buy food, if she's caught short. She's a bit vague, but thinks she's taken out half a dozen loans with Wonga over the past few months. . . She has had problems with credit cards before, and doesn't have an overdraft, but Wonga gave her credit very swiftly.

Not only will Susan's income be significantly less than that of the average person to take out a Wonga loan, according to Wonga themselves, she manages to be in that category of people who haven't access to mainstream forms of borrowing, has taken out nearly double the average payday loans per year per borrower (three-and-a-half), has taken out exactly double the average amount of loans Wonga customers use and is still an example Wonga felt was a “good representative.”

As FSA chief executive Hector Sands said on the release of the FCA's approach document, trust in financial services is at an “all time low”. It is the task of the FCA to find “the right balance between the benefits of early intervention and the consequent risks of reducing choice and raising costs”.

These are, of course, strong words given the context of the regulatory authority’s previous shyness towards tough action. But enough time has been spent tip-toeing around the issue; we need to learn how it is done in other countries instead of trying to reinvent the wheel.

When I caught up with Damon Gibbons, Director of the Centre for Responsible Credit and the author of a forthcoming book on debt in the 21st century, he reminded me:

The Financial Conduct Authority needs to be provided with the powers to help consumers who are being ripped off by unfair charges and extortionate interest rates. In many cases, the price of credit has nothing to do with the genuine risk to the lender, but is set at a level that simply takes advantage of consumers who are on desperately low incomes and need urgent access to cash.  There is no place for that sort of profiteering from poverty in many other European countries, most US states or Canada and we should give our regulator the powers to stamp it out here as well.

The amendment which Stella Creasy has suggested to the Financial Services Bill, the response to which should be known by May, would be a good chance for the government to signal its opposition to socially harmful lending. Those on the side of fairness should hold out hope.

A payday lender in Rochdale, England. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

Getty.
Show Hide image

Angela Merkel's call for a burqa ban sets a disturbing precedent

The German chancellor's plan for a partial ban of the full-face veil is a clearly political move, which will do more to harm those women who wear it than protect them.

 

In these febrile times, women’s freedom and autonomy has become a bargaining chip in the poker game of public propaganda — and that goes double for brown, Muslim and migrant women. Angela Merkel should know as well as any other female politician how demeaning it is to be treated as if what you wear is more important than what you say and what you do. With the far-right on the rise across Europe, however, the German chancellor has become the latest lawmaker to call for a partial ban on the burqa and niqab.

We are told that this perennial political football is being kicked about in the name of liberating women. It can have nothing to do, of course, with the fact that popular opinion is lurching wildly to the right in western democracies, there’s an election in Germany next year, and Merkel is seen as being too soft on migration after her decision to allow a million Syrian refugees to enter the country last year. She is also somehow blamed for the mob attacks on women in Cologne, which have become a symbol of the threat that immigration poses to white women and, by extension, to white masculinity in Europe. Rape and abuse perpetrated by white Europeans, of course, is not considered a matter for urgent political intervention — nor could it be counted on to win back voters who have turned from Merkel's party to the far-right AFD, which wants to see a national debate on abortion rights and women restricted to their rightful role as mothers and homemakers.

If you’ll allow me to be cynical for a moment, imposing state restrictions on what women may and may not wear in public has not, historically, been a great foundation for feminist liberation. The move is symbolic, not practical. In Britain, where the ban is also being proposed by Ukip the services that actually protect women from domestic violence have been slashed over the past six years — the charity Refuge, the largest provider of domestic violence services in the UK, has seen a reduction in funding across 80% of its service contracts since 2011.

It’s worth noting that even in western countries with sizeable Muslim minorities, the number of women who wear full burqa is vanishingly small. If those women are victims of coercion or domestic violence, banning the burqa in public will not do a thing to make them safer — if anything, it will reduce their ability to leave their homes, isolating them further.

In the wake of the Brexit vote, racist and Islamophobic attacks spiked in the UK. Hate crimes nationally shot up by 42% in the two weeks following the vote on 23 June. Hate crimes against Muslim women increased by over 300%, with visibly Muslim women experiencing 46% of all hate incidents. Instances of headscarves being ripped off have become so common that self-defense videos are being shared online, showing women how to deflect the “hijab grab”. In this context, it is absurd to claim that politicians proposing a burqa ban care about protecting women: the move is transparently designed to placate the very people who are making Muslim women feel unsafe in their own communities.

When politicians talk about banning the burqa, the public hears an attack on all Islamic headscarves — not everyone knows the difference between the hijab, the niqab and the burqa, and not everyone cares. The important thing is that seeing women dressed that way makes some people feel uncomfortable, and desperate politicians are casting about for ways to validate that discomfort.

Women who actually wear the burqa are not invited to speak about their experiences or state their preferences in this debate. On this point, Islamic fundamentalists and panicked western conservatives are in absolute agreement: Muslim women are provocative and deserve to be treated as a threat to masculine pride. They should shut up and let other people decide what’s best for them.

I know Muslim women who regard even the simple hijab as an object of oppression and have sworn never to wear one again. I also know Muslim women who wear headscarves every day as a statement both of faith and of political defiance. There is no neutral fashion option for a woman of Islamic faith — either way, men in positions of power will feel entitled to judge, shame and threaten. Either choice risks provoking anger and violence from someone with an opinion about what your outfit means for them. The important thing is the autonomy that comes with still having a choice.

A law which treats women like children who cannot be trusted to make basic decisions about their bodies and clothing is a sexist law; a law that singles out religious minorities and women of colour as especially unworthy of autonomy is a racist, sexist law. Instituting racist, sexist laws is a good way to win back the votes of racist, sexist people, but, again, a dreadful way of protecting women. In practice, a burqa ban, even the partial version proposed by Merkel which will most likely be hard to enforce under German constitutional law, will directly impact only a few thousand people in the west. Those people are women of colour, many of them immigrants or foreigners, people whose actual lives are already of minimal importance to the state except on an abstract, symbolic level, as the embodiment of a notional threat to white Christian patriarchy. Many believe that France's longstanding burqa ban has increased racial tensions — encapsulated by the image earlier this year of French police surrounding a woman who was just trying to relax with her family on the beach in a burkini. There's definitely male violence at play here, but a different kind — a kind that cannot be mined for political capital, because it comes from the heart of the state.

This has been the case for centuries: long before the US government used the term“Operation Enduring Freedom” to describe the war in Afghanistan, western politicians used the symbolism of the veil to recast the repeated invasion of Middle Eastern nations as a project of feminist liberation. The same colonists who justified the British takeover of Islamic countries abroad were active in the fight to suppress women’s suffrage at home. This is not about freeing women, but about soothing and coddling men’s feelings about women.

The security argument is even more farcical: border guards are already able to strip people of their clothes, underwear and dignity if they get the urge. If a state truly believes that facial coverings are some sort of security threat, it should start by banning beards, but let's be serious, masculinity is fragile enough as it is. If it were less so, we wouldn't have politicians panicking over how to placate the millions of people who view the clothing choices of minority and migrant women as an active identity threat.

Many decent, tolerant people, including feminists, are torn on the issue of the burqa: of course we don't want the state to start policing what women can and can't wear, but isn't the burqa oppressive? Maybe so, but I was not aware of feminism as a movement that demands that all oppressive clothing be subject to police confiscation, unless the Met’s evidence lockers are full of stilettos, girdles and push-up bras. In case you're wondering, yes, I do feel uncomfortable on the rare occasions when I have seen people wearing the full face veil in public. I've spent enough time living with goths and hippies that I've a high tolerance for ersatz fashion choices — but do wonder what their home lives are like and whether they are happy and safe, and that makes me feel anxious. Banning the burqa might make me feel less anxious. It would not, however, improve the lives of the women who actually wear it. That is what matters. My personal feelings as a white woman about how Muslim women choose to dress are, in fact, staggeringly unimportant.

If you think the Burqa is oppressive and offensive, you are perfectly entitled never to wear one. You are not, however, entitled to make that decision for anyone else. Exactly the same principle applies in the interminable battle over women's basic reproductive choices: many people believe that abortion is wrong, sinful and damaging to women. That's okay. I suggest they never have an abortion. What's not okay is taking away that autonomy from others as a cheap ploy for good press coverage in the runup to an election.

This debate has been dragging on for decades, but there's a new urgency to it now, a new danger: we are now in a political climate where the elected leaders of major nations are talking about registries for Muslims and other minorities. Instituting a symbolic ban on religious dress, however extreme, sets a precedent. What comes next? Are we going to ban every form of Islamic headdress? What about the yarmulke, the tichel, the Sikh turban, the rainbow flag? If this is about community cohesion, what will it take to make white conservatives feel “comfortable”? Where does it stop? Whose freedoms are politicians prepared to sacrifice as a sop to a populace made bitter and unpredictable by 30 years of neoliberal incompetence? Where do we draw the line?

We draw it right here, between the state and the autonomy of women, particularly minority and migrant women who are already facing harassment in unprecedented numbers. Whatever you feel about the burqa, it is not the role of government to police what women wear, and doing it has nothing to do with protection. It is chauvinist, it is repressive, it is a deeply disturbing precedent, and it has no place in our public conversation.

 
 
 
 

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things.