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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What kind of Christian is Theresa May?

And why aren’t we questioning the vicar’s daughter on how her faith influences her politics?

“It is part of me. It is part of who I am and therefore how I approach things,” Theresa May told Kirsty Young when asked about her faith on BBC Radio 4’s Desert Island Discs in November 2014. “I think it’s right that we don’t sort of flaunt these things here in British politics but it is a part of me, it’s there, and it obviously helps to frame my thinking.”

The daughter of a Church of England vicar, Rev. Hubert Brasier, May grew up an active Christian in Oxfordshire. She was so involved in parish life that she even taught some Sunday school classes. She goes on in the Desert Island Discs interview to choose the hymn When I Survey the Wondrous Cross sung by a chapel congregation, and recalls being alone in church with her parents, kneeling and singing together.

Despite her intense attachment to local CofE life, Theresa May’s role as a Christian in politics is defined more by her unwillingness to “flaunt” (in her words) her faith.

Perhaps this is partly why, as a Christian, May avoided the scrutiny directed at Lib Dem leader and evangelical Christian Tim Farron over the past week of his stance on homosexuality and abortion.

As Farron wriggled – first saying he didn’t want to make “theological pronouncements” on whether or not being gay is a sin (and then, days later, announcing that it isn’t) – May’s critics scratched their heads about why her voting record on such matters isn’t in the media spotlight.

She has a socially conservative voting record when it comes to such subjects. As the journalist and activist Owen Jones points out, she has voted against equalising the age of consent, repealing Section 28, and gay adoption (twice).

Although her more recent record on gay rights is slightly better than Farron’s – she voted in favour of same-sex marriage throughout the process, and while Farron voted against the Equality Act Sexual Orientation Regulations in 2007 (the legislation obliging bed and breakfast owners and wedding cake makers, etc, not to discriminate against gay people), May simply didn’t attend.

May has also voted for the ban on sex-selective abortions, for reducing the abortion limit to 20 weeks, abstained on three-parent babies, and against legalising assisted suicide.

“Looking at how she’s voted, it’s a slightly socially conservative position,” says Nick Spencer, Research Director of the religion and society think tank Theos. “That matches with her generally slightly more economically conservative, or non-liberal, position. But she’s not taking those views off pages of scripture or a theology textbook. What her Christianity does is orient her just slightly away from economic and social liberalism.”

Spencer has analysed how May’s faith affects her politics in his book called The Mighty and the Almighty: How Political Leaders Do God, published over Easter this year. He found that her brand of Christianity underpinned “the sense of mutual rights and responsibilities, and exercising those responsibilities through practical service”.

May’s father was an Anglo-Catholic, and Spencer points out that this tradition has roots in the Christian socialist tradition in the early 20th century. A world away from the late Victorian Methodism that fellow Christian Margaret Thatcher was raised with. “That brought with it a package of independence, hard work, probity, and economic prudence. They’re the values you’d get from a good old Gladstonian Liberal. Very different from May.”

Spencer believes May’s faith focuses her on a spirit of citizenship and communitarian values – in contrast to Thatcher proselytising the virtues of individualism during her premiership.

Cradle Christian

A big difference between May and Farron’s Christianity is that May is neither a convert nor an evangelical.

“She’s a cradle Christian, it’s deep in her bloodstream,” notes Spencer. “That means you’re very unlikely to find a command-and-control type role there, it’s not as if her faith’s going to point her in a single direction. She’s not a particularly ideological politician – it’s given her a groundwork and foundation on which her politics is built.”

This approach appears to be far more acceptable in the eyes of the public than Farron’s self-described “theological pronouncements”.  May is known to be a very private politician who keeps her personal life, including her ideas about faith, out of the headlines.

“I don’t think she has to show off, or join in, she just does it; she goes to church,” as her former cabinet colleague Cheryl Gillan put it simply to May’s biographer Rosa Prince.

The voters’ view

It’s this kind of Christianity – quiet but present, part of the fabric without imposing itself – that chimes most with British voters.

“In this country, given our history and the nature of the established Church, it's something that people recognise and understand even if they don't do it themselves,” says Katie Harrison, Director of the Faith Research Centre at polling company ComRes. “Whether or not it’s as active as it used to be, lots of people see it as a nice thing to have, and they understand a politician who talks warmly about those things. That’s probably a widely-held view.”

Although church and Sunday school attendance is falling (about 13 per cent say they regularly attend Christian religious services, aside from weddings and funerals), most current surveys of the British population find that about half still identify as Christian. And ComRes polling in January 2017 found that 52 per cent of people think it’s important that UK politicians and policy-makers have a good understanding of religion in the UK.

Perhaps this is why May, when asked by The Sunday Times last year how she makes tough decisions, felt able to mention her Christianity:  “There is something in terms of faith, I am a practising member of the Church of England and so forth, that lies behind what I do.”

“I don’t think we’re likely to react hysterically or with paranoid fear if our politicians start talking about their faith,” reflects Spencer. “What we don’t like is if they start ‘preaching’ about it.”

“Don’t do God”

So if May can speak about her personal faith, why was the nation so squeamish when Tony Blair did the same thing? Notoriously, the former Labour leader spoke so frankly about his religion when Prime Minister that his spin doctor Alastair Campbell warned: “We don’t do God.” Some of Blair’s critics accuse him of being driven to the Iraq war by his faith.

Although Blair’s faith is treated as the “watershed” of British society no longer finding public displays of religion acceptable, Spencer believes Blair’s problem was an unusual one. Like Farron, he was a convert. He famously converted to Catholicism as an adult (and by doing so after his resignation, side-stepped the question of a Catholic Prime Minister). Farron was baptised at 21. The British public is more comfortable with a leader who is culturally Christian than one who came to religion in their adulthood, who are subjected to more scrutiny.

That’s why Gordon Brown, David Cameron and Theresa May can get away with talking about their faith, according to Spencer. “Brown, a much more cultural Presbyterian, used a lot of Biblical language. Cameron talked about it all the time – but he was able to do so because he had a vague, cultural, undogmatic Anglicanism,” he tells me. “And May holds it at arm’s length and talks about being a clergyman’s daughter, in the same way Brown talked about his father’s moral compass.”

This doesn’t stop May’s hard Brexit and non-liberal domestic policy jarring with her Christian values, however. According to Harrison’s polling, Christian voters’ priorities lie in social justice, and tackling poverty at home and overseas – in contrast with the general population’s preoccupations.

Polling from 2015 (pre-Brexit, granted) found that practising Christians stated more concern about social justice (27 per cent) than immigration (14 per cent). When entering No 10, May put herself “squarely at the service of ordinary working-class people”. Perhaps it’s time for her to practise what she preaches.

Anoosh Chakelian is senior writer at the New Statesman.

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