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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I can’t follow Marie Kondo's advice – even an empty Wotsits packet “sparks joy” in me

I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

I have been brooding lately on the Japanese tidying freak Marie Kondo. (I forgot her name so I typed “Japanese tidying freak” into Google, and it was a great help.) The “Japanese” bit is excusable in this context, and explains a bit, as I gather Japan is more on the case with the whole “being tidy” thing than Britain, but still.

Apart from telling us that we need to take an enormous amount of care, to the point where we perform origami when we fold our underpants, which is pretty much where she lost me, she advises us to throw away anything that does not, when you hold it, “spark joy”. Perhaps I have too much joy in my life. I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

After a while I gave up on this because I was getting a bit too happy with all the memories, so then I thought to myself, about her: “This is someone who isn’t getting laid enough,” and then I decided that was a crude and ungallant thought, and besides, who am I to wag the finger? At least if she invites someone to her bedroom no one is going to run screaming from it, as they would if I invited anyone to my boudoir. (Etym: from the French “bouder”, to sulk. How very apt in my case.) Marie Kondo – should bizarre circumstance ever conspire to bring her to the threshold – would run screaming from the Hovel before she’d even alighted the stairs from the front door.

I contemplate my bedroom. As I write, the cleaning lady is in it. To say that I have to spend half an hour cleaning out empty Wotsits packets, and indeed wotnot, before I let her in there should give you some idea of how shameful it has got. And even then I have to pay her to do so.

A girlfriend who used to be referred to often in these pages, though I think the term should be a rather less flippant one than “girlfriend”, managed to get round my natural messiness problem by inventing a game called “keep or chuck”.

She even made up a theme song for it, to the tune from the old Spiderman TV show. She would show me some object, which was not really rubbish, but usually a book (it may not surprise you to learn that it is the piles of books that cause most of the clutter here), and say, “Keep or chuck?” in the manner of a high-speed game show host. At one point I vacillated and so she then pointed at herself and said, “Keep or chuck?” I got the message.

These days the chances of a woman getting into the bedroom are remote. For one thing, you can’t just walk down the street and whistle for one much as one would hail a cab, although my daughter is often baffled by my ability to attract females, and suspects I have some kind of “mind ray”. Well, if I ever did it’s on the blink now, and not only that – right now, I’m not even particularly bothered that it’s on the blink. Because, for another thing, I would frankly not care to inflict myself upon anyone else at the moment.

It was all a bit of a giggle eight years ago, when I was wheeled out of the family home and left to my own devices. Of course, when I say “a bit of a giggle”, I mean “terrifying and miserable”, but I had rather fewer miles on the clock than I do now, and a man can, I think, get away with a little bit more scampish behaviour, and entertain a few more illusions about the future and his own plausibility as a character, when he is squarely in his mid-forties than when he is approaching, at speed, his middle fifties.

Death has rather a lot to do with it, I suppose. I had not actually seen, or touched, a dead body until I saw, and touched, my own father’s a few weeks ago. That’s what turns an abstract into a concrete reality. You finally put that to one side and gird up your loins – and then bloody David Bowie snuffs it, and you find yourself watching the videos for “Blackstar” and “Lazarus” over and over again, and reach the inescapable conclusion that death is not only incredibly unpleasant, it is also remorseless and very much nearer than you think.

And would you, dear reader, want to be involved with anyone who kept thinking along those lines? I mean, even if he learned how to fold his undercrackers into an upright cylinder, like a napkin at a fancy restaurant, before putting them in his drawer? When he doesn’t even have a drawer?

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war