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.
 

Getty
Show Hide image

The deafening killer - why noise will be the next great pollution scandal

A growing body of evidence shows that noise can have serious health impacts too. 

Our cities are being poisoned by a toxin that surrounds us day and night. It eats away at our brains, hurts our hearts, clutches at our sleep, and gnaws at the quality of our daily lives.

Hardly a silent killer, it gets short shrift compared to the well-publicised terrors of air pollution and sugars food. It is the dull, thumping, stultifying drum-beat of perpetual noise.

The score that accompanies city life is brutal and constant. It disrupts the everyday: The coffee break ruined by the screech of a line of double decker buses braking at the lights. The lawyer’s conference call broken by drilling as she makes her way to the office. The writer’s struggle to find a quiet corner to pen his latest article.

For city-dwellers, it’s all-consuming and impossible to avoid. Construction, traffic, the whirring of machinery, the neighbour’s stereo. Even at home, the beeps and buzzes made by washing machines, fridges, and phones all serve to distract and unsettle.

But the never-ending noisiness of city life is far more than a problem of aesthetics. A growing body of evidence shows that noise can have serious health impacts too. Recent studies have linked noise pollution to hearing loss, sleep deprivation, hypertension, heart disease, brain development, and even increased risk of dementia.

One research team compared families living on different stories of the same building in Manhattan to isolate the impact of noise on health and education. They found children in lower, noisier floors were worse at reading than their higher-up peers, an effect that was most pronounced for children who had lived in the building for longest.

Those studies have been replicated for the impact of aircraft noise with similar results. Not only does noise cause higher blood pressure and worsens quality of sleep, it also stymies pupils trying to concentrate in class.

As with many forms of pollution, the poorest are typically the hardest hit. The worst-off in any city often live by busy roads in poorly-insulated houses or flats, cheek by jowl with packed-in neighbours.

The US Department of Transport recently mapped road and aircraft noise across the United States. Predictably, the loudest areas overlapped with some of the country’s most deprived. Those included the south side of Atlanta and the lowest-income areas of LA and Seattle.

Yet as noise pollution grows in line with road and air traffic and rising urban density, public policy has turned a blind eye.

Council noise response services, formally a 24-hour defence against neighbourly disputes, have fallen victim to local government cuts. Decisions on airport expansion and road development pay scant regard to their audible impact. Political platforms remain silent on the loudest poison.

This is odd at a time when we have never had more tools at our disposal to deal with the issue. Electric Vehicles are practically noise-less, yet noise rarely features in the arguments for their adoption. Just replacing today’s bus fleet would transform city centres; doing the same for taxis and trucks would amount to a revolution.

Vehicles are just the start. Millions were spent on a programme of “Warm Homes”; what about “Quiet Homes”? How did we value the noise impact in the decision to build a third runway at Heathrow, and how do we compensate people now that it’s going ahead?

Construction is a major driver of decibels. Should builders compensate “noise victims” for over-drilling? Or could regulation push equipment manufacturers to find new ways to dampen the sound of their kit?

Of course, none of this addresses the noise pollution we impose on ourselves. The bars and clubs we choose to visit or the music we stick in our ears. Whether pumping dance tracks in spin classes or indie rock in trendy coffee shops, people’s desire to compensate for bad noise out there by playing louder noise in here is hard to control for.

The Clean Air Act of 1956 heralded a new era of city life, one where smog and grime gave way to clear skies and clearer lungs. That fight still goes on today.

But some day, we will turn our attention to our clogged-up airwaves. The decibels will fall. #Twitter will give way to twitter. And every now and again, as we step from our homes into city life, we may just hear the sweetest sound of all. Silence.

Adam Swersky is a councillor in Harrow and is cabinet member for finance. He writes in a personal capacity.