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.
 

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All the Premiership teams are competing to see who’s got the biggest stadium

It’s not just a financial, but a macho thing – the big clubs want to show off that they have a whopper.

Here in NW5, where we live noisily and fashionably, we are roughly equidistant from Arsenal and Spurs. We bought the house in 1963 for £5,000, which I mention constantly, to make everyone in the street pig sick. Back in 1963, we lived quietly and unfashionably; in fact, we could easily have been living in Loughton, Essex. Now it’s all changed. As have White Hart Lane and Highbury.

Both grounds are a few metres further away from us than they once were, or they will be when White Hart Lane is finished. The new stadium is a few metres to the north, while the Emirates is a few metres to the east.

Why am I saying metres? Like all football fans, I say a near-miss on goal was inches wide, a slow striker is a yard off his pace, and a ball player can turn on a sixpence. That’s more like it.

White Hart Lane, when finished, will hold 61,000 – a thousand more than the Emirates, har har. Meanwhile, Man City is still expanding, and will also hold about 60,000 by the time Pep Guardiola is into his stride. Chelsea will be next, when they get themselves sorted. So will Liverpool.

Man United’s Old Trafford can now hold over 75,000. Fair makes you proud to be alive at this time and enjoying the wonders of the Prem.

Then, of course, we have the New Wembley, architecturally wonderful, striking and stunning, a beacon of beauty for miles around. As they all are, these brave new stadiums. (No one says “stadia” in real life.)

The old stadiums, built between the wars, many of them by the Scottish architect Archibald Leitch (1865-1939), were also seen as wonders of the time, and all of them held far more than their modern counterparts. The record crowd at White Hart Lane was in 1938, when 75,038 came to see Spurs play Sunderland. Arsenal’s record at Highbury was also against Sunderland – in 1935, with 73,295. Wembley, which today can hold 90,000, had an official figure of 126,000 for the first Cup Final in 1923, but the true figure was at least 150,000, because so many broke in.

Back in 1901, when the Cup Final was held at Crystal Palace between Spurs and Sheffield United, there was a crowd of 110,820. Looking at old photos of the Crystal Palace finals, a lot of the ground seems to have been a grassy mound. Hard to believe fans could see.

Between the wars, thanks to Leitch, big clubs did have proper covered stands. Most fans stood on huge open concrete terraces, which remained till the 1990s. There were metal barriers, which were supposed to hold back sudden surges, but rarely did, so if you were caught in a surge, you were swept away or you fell over. Kids were hoisted over the adults’ heads and plonked at the front.

Getting refreshments was almost impossible, unless you caught the eye of a peanut seller who’d lob you a paper bag of Percy Dalton’s. Getting out for a pee was just as hard. You often came home with the back of your trousers soaked.

I used to be an expert on crowds as a lad. Rubbish on identifying a Spitfire from a Hurricane, but shit hot on match gates at Hampden Park and Ibrox. Answer: well over 100,000. Today’s new stadiums will never hold as many, but will cost trillions more. The money is coming from the £8bn that the Prem is getting from TV for three years.

You’d imagine that, with all this money flooding in, the clubs would be kinder to their fans, but no, they’re lashing out, and not just on new stadiums, but players and wages, directors and agents. Hence, so they say, they are having to put up ticket prices, causing protest campaigns at Arsenal and Liverpool. Arsène at Arsenal has admitted that he couldn’t afford to buy while the Emirates was being built. Pochettino is saying much the same at Spurs.

It’s not just a financial, but a macho thing – the big clubs want to show off that they have a whopper. In the end, only rich fans will be able to attend these supergrounds. Chelsea plans to have a private swimming pool under each new box, plus a wine cellar. Just like our street, really . . . 

Hunter Davies is a journalist, broadcaster and profilic author perhaps best known for writing about the Beatles. He is an ardent Tottenham fan and writes a regular column on football for the New Statesman.

This article first appeared in the 11 February 2016 issue of the New Statesman, The legacy of Europe's worst battle