Panorama shows again that the UK payday loan industry is trouble

The government insists that there is enough regulation. They're wrong, writes Carl Packman.

Rochdale, one of the pioneering towns in the UK during the industrial revolution, was a major mill town known for its exemplary textile manufacturing in the nineteenth century. It was also where the first fully documented credit union in the UK was set up in 1844, on which many others were subsequently modelled. 

Now Rochdale is a place blighted by poverty and unemployment (with rates 40 per cent higher than the national average).

It was also the focus of a recent episode of Panorama, showing the burden put on residents by home credit sellers and the wave of payday advance centres like The Money Shop who continue to draw bulging profits at a time of considerable financial hardship.

From various different shops, BBC reporter Richard Bilton collected nearly £1000 with relative ease and little questioning. 

Shockingly, all such shops are covered by the Office for Fair Trading (OFT). In 2010 the OFT's guidance for creditors on irresponsible lending pointed out that: 

“All assessments of affordability should involve a consideration of the potential for the credit commitment to adversely impact on the borrower's financial situation, taking account of information that the creditor is aware of at the time the credit is granted.”

At no point did any of the shops that Bilton entered assess or consider the adverse affects these loans could have on him – thus they were in breach of the OFT's guidance, as well as the codes of conduct by the Finance & Leasing Association, who independently monitor payday companies.

The problem here is light-touch regulation. In addition to guidance, the OFT can revoke credit licenses, but as David Fisher, OFT's director of consumer credit, pointed out earlier this year the OFT runs on only £11m with 120 staff in the consumer credit office. The incentive is therefore to let some cases slide.

With Panorama, Bilton also goes undercover and trains with a collection lady from the Provident – a company set up in the nineteenth century to offer loans to those excluded by banks.

A very telling part of the programme shows the lady say perversely of “good customers”, who do pay back money on each loan, that “you don't ever want them to pay up”.

This itself is indicative of the financial model of the payday lending industry and home credit itself, and really gets to the heart of the matter. Mark J. Flannery and Katherine Samolyk, in an influential paper Payday Lending: Do the Costs Justify the Price?, ask whether payday lenders can survive if they provide only "occasional" credit?

Part of a lender's schtick is that they only extend short-term credit to people as a quick-fix solution and that their model does not depend on customers rolling over on loans (taking out loans to service an existing loan).

But Flannery and Samolyk observe that, if this were true, such businesses might just survive by the skin of their teeth, though its long-term scale would be far smaller. In other words, for a lender to be completely responsible in their lending, they would have to forego profit maximisation and reduce the lifespan of their business – and given the regulatory landscape currently in force we have to trust them on their word that they follow a self-defeating business model.

Perhaps what was most disconcerting about meeting the collector Bilton shadowed was how unlikeable she was. Resorting to calling customers offensive names and lacking sympathy with them, gave the impression (despite this not being the BBC's intention) that all agents for home credit lenders are like this. This isn't the case.

It's often forgotten that collectors are sometimes just as vulnerable as the people they're collecting from. One former agent I spoke to, who worked with the Provident, took over the job from a friend who fell ill but wanted to keep her job with the company.

She told me she originally felt the company was respectable because her friend worked for them, though soon realised this wasn't true when collecting in some of the poorest parts of the area.

“There was a lot of pressure to keep selling”, she continued, “then after 18 weeks, if they couldn't pay, they'd send in collection agencies”. Furthermore, “managers themselves were giving the green light for lending to people who couldn't mentally consent, exploiting their disability.”

On several occasions she sacrificed her own commission to disincentivise customers from taking out more loans and offered them her own advice – something Provident itself would not take kindly to.

In spite of this, it is still the government's position that the UK regulatory architecture is enough. And yet it is evident that self-regulation is failing people in the poorest communities. Until such time that ministers open their eyes these practices will continue under our noses. 

Payday loans. 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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Meet the ex-footballers launching a support network for victims of sexual abuse in the sport

The Offside Trust is set up after hundreds have come forward, and 55 football clubs have been linked to allegations of abuse.

In a sumptuous room inside a luxurious hotel in the centre of Manchester, the country’s media anxiously await the arrival of a man whose story has rocked English football to its very foundations.

Since Andy Woodward went public with allegations that he experienced sexual abuse as a young footballer in the 1980s, the nation’s favourite sport has been left in crisis and, in the process, forced to do some soul-searching.

Following Woodward’s story, a number of his peers have also come forward with tales of unimaginable suffering.

This week, some of those men have joined together to launch the Offside Trust, an independently-run body aiming to provide support to players and the families of those who have suffered sexual abuse in football and other sports.

According to Woodward and his colleagues, the Trust won’t just be a way to help those who have been abused while playing the sport they love, but also represents a direct response to institutions that, in their view, have failed to protect them.

“A number of people who have come forward have indicated that they don’t have trust in the establishment,” says Edward Smethurst from Prosperity Law LLP, a Manchester law firm in charge of administering the trust.

“We are not here to criticise any of the establishment bodies, but we do have to respect the sensibilities and the opinions of the victims.” 

Wearing a crisp blue suit, hair combed neatly into place, Woodward’s composed demeanour masks the tremendous emotional stress he has revealed to the world he had to endure for decades, in silence until now.

Hearing him retell his story time and again, it is evident that, although exhausting, this process of letting the world know the horrors he says he experienced as a boy is both cathartic and a way to help others.

“I’m totally overwhelmed, the emotions are just unreal,” he says. “I can’t believe how many [people] have come forward, but I just encourage more and more [people] to have that strength and have that belief to do it.”

Sitting beside Woodward is Steve Walters – a former football prodigy whose career was cut short due to a blood disorder – who says he fell prey to the same serial child molester as Woodard. The person in question can no longer be named for legal reasons.

Walters tells me how his story has affected every aspect of his life. “It has ruined marriages, the relationship with my children, flashbacks, lack of sleep, panic attacks,” he tells me.

Walters speaks of “injustices” done to him for the past 20 years by those in charge of the sport he once loved. But he also knows how he would like to start turning the page and move on with his life.

“An apology [from Crewe Football Club] would be a start,” he says. “For them to not even put out one small apology, it does hurt.”

Since Woodward’s allegations were first made public on 16 November, 18 police forces across the country are now investigating claims of historic sexual abuse in football.

Every player I speak to at the Offside Trust launch in Manchester describes this as an epidemic, and that, in modern Britain, some children are still at the mercy of paedophiles operating within the sport. 

“I do believe it’s happening,” says Jason Dunford, who also claims to have been abused at Crewe Alexandra. “I believe it’s happening on a lower scale than when we were children, but as a father of a young boy who is around the football industry at the moment, I still have worries.”

Woodward coming forward has had worldwide implications. Walters and Dunford tell me they have been contacted by players as far-flung as South America and Australia who say they have been through the same ordeal as young footballers. The men are adamant this is not a UK problem, but a football one – wherever the game is played.

Woodward is mentally drained. Prior to the interview, he repeatedly tells me how the whirlwind of the last few weeks has affected his health. But he knows that this is his chance, perhaps the only one he’ll get, to help those like him.

“The closure will be when I feel like I’m satisfied that I have done everything I can to help as many people out there as possible,” he says. “People with children in football need protecting.” 

Felipe Araujo is a freelance journalist based in London. He writes about race, culture and sports. He covered the Rio Olympics and Paralympics on the ground for the New Statesman. He tweets @felipethejourno.