High-interest lenders move on from paydays

"Payday loan" companies are starting to branch out to much longer terms

Turn on the telly during the daytime and you are very likely to see adverts informing you about PPI claims or payday loans. Now there are a new bunch to be aware of: 12-month, high-cost, unsecured loans at rates of interest of up to 278 per cent – meaning that repayments will already be over twice the amount you have borrowed, and that excludes fees and penalties that might be incurred (Pounds to Pocket, for example, charge £12 for their penalty fees).

That these companies are advertising expensive loans over a year, with no credit checks, and where the money can be in your account in ten minutes, shows another failure in the mainstream banking sector to offer sensible loans to consumers.

Figures show that even after UK banks were in receipt of bailout funds, 1.75 million people go without a transitional bank account, and 9 million lack access to affordable credit. To bolster this credit cards have dropped in circulation by 1 million since 2011 and membership to credit unions have not risen from 2 per cent of the population, despite funding and modernisation attempts.

The cost of living, including how much we spend on food and bills, continues to go up, and real incomes are no higher than they were in 2005 for many of us.

As payday lenders are set to be the beneficiaries of this mess in personal finance, it's hardly a surprise to see them venturing out with other products. One broker, 1 Year Loan, has on its website:

If you too [sic] facing inadequacy of funds and want a [sic] financial help, then 1 year payday loans can be the loan service that you can rely upon […] Apply with 1 Year Loan No Credit Check right away!

With the 12-month loan, lenders offer larger sums that they claim are competitive when compared with other payday lenders.

Mentioned in a report on these new loans in the Independent, the company Lending Stream boast that their 3,378.1 per cent APR beats Wonga's 4,214 per cent equivalent – though of course Wonga do not encourage taking out loans over 6-12 months.

Pounds to Pocket, another company, on their website point out that if you borrow £500 for a year you would pay back £79.09 a month, a total of £949.01 including interest of £449.01.

It is to the shame of mainstream lenders that expensive alternatives are seeing a growth in their product. In France and Germany mainstream credit facilities are part of most basic bank account packages – something not extended to everyone in the UK.

In the Independent's report, the journalists mistakenly say that payday loans could become small fry compared to the 12-month loans, while the headline notes: "Forget payday loans, the one-year debts are the ones to fear".

This is not the right way to look at the situation. What this represents is payday loan companies finding a gap in the market and swooping in where mainstream services are being risk averse. This should not put us at ease with payday lenders at all.

Minister Norman Lamb recently welcomed the revised codes of conduct from the four trade bodies that represent payday lenders (Consumer Finance Association (CFA), Finance and Leasing Association (FLA), British Cheque and Credit Association (BCCA) and Consumer Credit Trade Association (CCTA)).

But payday lenders are obliged to show how much their product costs anyway, set out in the Office for Fair Trading (OFT) lending code. In their guide on irresponsible lending, the OFT note that lenders should carry out proper credit checks and disincentivise rollovers. The revised codes are the very least we can expect.

Yet the industry is currently under investigation by the OFT after concerns lenders are taking advantage of people in financial difficulty – which is contrary to their codes.

We should not become complacent about the payday lenders even when other products arrive on the market that do not sit well with us. The government and Norman Lamb should be spending all the time they can spare to finding out why people end up taking out these loans and making sure they can seek mainstream services where it benefits them.

A payday loan company in Birkenhead. 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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There is nothing Donald Trump can do to stop immigration

The story of American immigration has been flowing inexorably in one direction. Even Trump's 24/7 tweeting can't turn the tide.

On 20 January 2009, it seemed that America had crossed the racial Rubicon. The simple fact of a non-white face behind a podium saying “president of the United States” would assure Barack Obama a place in the history books and begin a new chapter in the nation’s saga.

In January 2017, things look very different. Donald Trump won the election for many reasons, but one of them was surely a “whitelash” against a black president. Millions of Americans are not comfortable with “a person of colour” as their head of state and commander-in-chief. Some are racist; others enjoy some racist banter at the bar; many more just draw a colour line in the privacy of their hearts. Trump’s nominations to cabinet posts have included only a few non-whites, and these look like tokenism. His attitude to multiculturalism is paraded on donaldjtrump.com. At the top of his ten-point plan to “make America great again” is the pledge: “Begin working on an impenetrable physical wall on the southern border, on day one. Mexico will pay for the wall.”

Will Trump’s whitelash supporters be appeased? I doubt it. Judged against the longue durée of American history, it is Trump who is rowing against the tide – a tide of migration that has gradually eroded the dominance over American life and politics of those of white Anglo-Saxon Protestant (Wasp) stock. Nothing he can do will change that. Not the wall. Not the banning of Islamic immigrants. Not the deportation of “undesirables”. Not even 24/7 tweets. The Donald cannot turn back the Tide.

The story of American immigration has been flowing inexorably in one direction, despite periodic ebbs. The Trump whitelash is the latest of those ebbs. Here are a few snapshots from the past.

In the 1850s, the “Mexicans” of that era were Catholics, fleeing economic depression in Ireland and southern Germany and washing up in big cities such as New York and Chicago. The backlash against them took the form of the American Party, whose members had to be both native-born Protestants and the offspring of Protestant parents. Campaigning against “rum and Romanism”, the American Party demanded strict temperance laws and a ban on Catholics holding public office because of their “thraldom” to the pope. The party had a meteoric rise and fall, quickly eclipsed by the North-South divide over slavery, but anti-papism took time to fade. It was another century before the US elected its first Catholic president: John F Kennedy.

By 1900, the “threat” to American purity was posed by the “New Immigrants” from Italy, the Balkans and the Russian empire who did not look or sound like “Anglo-Saxons” from Britain, Ireland, Germany and Scandinavia. In the peak year of 1907, 1.3 million migrants were admitted, 80 per cent from southern and eastern Europe. “The floodgates are open,” railed one New York newspaper. “The sewer is choked. The scum of immigration is viscerating upon our shores.” It was time to drain the swamp.

The Wasp-dominated Immigration Restriction League campaigned for the “exclusion of elements unsuitable for citizenship or injurious to national character”. Its rhetoric was often overtly racist. In 1896, the Boston economist Francis A Walker blamed creeping globalisation in the form of railroads and steamships for creating what he termed “pipeline immigration”. “So broad and smooth is the channel that there is no reason why every foul and stagnant pool of population in Europe, which no breath of intellectual or industrial life has stirred for ages, should not be decanted upon our soil” – dumping in America those he called “beaten men from beaten races; representing the worst failures in the struggle for existence”.

The wartime crusade for “100 per cent Americanism”, together with the 1919 “Red Scare” against communists and anarchists, finally closed the open door. In 1921 and 1924, Congress slashed migration from Europe to 150,000 a year and imposed quotas based on the proportion of nationalities in the census of 1890, thereby targeting the New Immigrants. Some congressmen made the case in explicitly racist terms, among them Senator Ellison Smith of South Carolina, who declared: “I think we now have sufficient population in our country for us to shut the door and to breed up a pure, unadulterated American citizenship,” formed of “pure Anglo-Saxon stock”. This was the way to make America great.

It was not until 1965 that a new Immigration Act abolished national quotas. At the time, President Lyndon B Johnson played down the law’s significance. It would not, he said, “reshape the structure of our daily lives” but merely correct “a cruel and enduring wrong”. LBJ assumed that the beneficiaries would be people from southern and eastern Europe, the main victims of the 1920s quotas, and he did not anticipate a flood of migrants. Yet in the half-century since 1965, there has been a sustained surge of immigration. Whereas in the 1960s and 1970s, “foreign-born” represented only 5 per cent of the US population, in the 2010 census, the figure was 13 per cent – close to the peak of almost 15 per cent in 1920.

What’s more – and again contrary to Johnson’s expectations – the migratory surge came not from Europe but from Asia and, especially, Latin America. By 2010, 16.3 per cent of the US population of 309 million was identified as Hispanic or Latino, two-thirds of which was Mexican in origin. More than four million Mexicans entered the US legally in the decade from 2000 – equivalent to the total from the whole of Asia. Hence the political appeal of “build a wall”.

African Americans constitute the second largest minority group in the US, at 13 per cent. Most are the descendants of forced migrants in the 17th and 18th centuries: slavery was the “original sin” from which the land of liberty had been conceived. Even after emancipation during the Civil War, blacks remained second-class citizens, enduring segregation in the South and discrimination in jobs, housing and education in the urban North. It was Johnson again who unlocked the door: his Civil Rights and Voting Rights Acts of 1964-65 finally applied federal power to overcome states’ rights.

In doing so, however, LBJ triggered a realignment that pushed much of the previously solid Democratic South into the Republican camp. Richard Nixon’s “Southern strategy” in 1968 signalled a sustained if coded use of the race card by Republicans to woo the silent majority of disenchanted whites – carried on more recently by the Tea Party and Trump.

Hispanics and blacks – now nearly 30 per cent of the US population – have literally changed the face of America. Barack Obama incarnates the new look, being African American but of an exotic sort: the son of a black man from Kenya and a white woman from Kansas; born in Hawaii; raised there and then in Indonesia; and trained at Harvard Law School. As he said in 2008, “I have brothers, sisters, nieces, nephews, uncles and cousins, of every race and every hue, scattered across three continents, and for as long as I live, I will never forget that in no other country on Earth is my story even possible.”

Perhaps in no other country is Trump’s story also possible. Yet it is Obama who has history on his side. The US Census Bureau has projected that whites, who made up two-thirds of the population in 2008, will constitute less than half the total well before 2050 – outnumbered by Hispanics, blacks, Asians and other non-white minority groups with higher birth rates. However, by mid-century, the great divide between white and non-white that has colour-coded US history will probably have become meaningless because of intermarriage. “Obama is 2050,” declared the demographer William H Frey: “Multiracial. Multi-ethnic.”

Governing such a diverse country – even holding it together – will be an immense challenge. The vicious 2016 election prefigured many more culture wars ahead. In the long run, however, Obama – not Trump – is the face of America’s future. Some see that as a sign of degeneration. “Perhaps this is the first instance in which those with their pants up are going to get caught by those with their pants down,” fumed the anti-immigration campaigner John Tanton. But earlier nativists said the same, warning that supposed “lesser breeds” such as “Negroes”, the Irish or Italians were out-breeding their “betters”. Those with greater faith in America’s tradition of painful adaptability might see the country’s growing demographic diversity as signalling not the decline of the Great Republic but another of its epic transformations.

David Reynolds is the author of “America: Empire of Liberty” (Penguin)

This article first appeared in the 19 January 2017 issue of the New Statesman, The Trump era