BIS and OFT hint at cosmestic changes to payday loan regulations

Some positive, but largely symbolic, news.

There are going to be some positive changes happening to the regulation of the payday lending industry as of Wednesday–though we can expect a mixed reception from the release of two government reports looking in to it, one by the Office for Fair Trading (OFT) and the other by the Department of Business, Industry and Skills (BIS). 

To put a positive gloss on them more work will be done by the regulatory body to ensure bad practices in the industry, such as not carrying out rigorous credit checks, will be properly punished. On the other hand the BIS report has found evidence that capping the cost at which credit can be sold (notoriously high by payday lenders on the high street, many of whom have a 4000 per cent APR attached to them) would be a detriment to consumers.

Despite the prospect of rogue lenders losing their licenses, this will come as a disappointment to critics of the payday lending industry who felt there would be a significant change in direction by the government, after amending the Financial Services Bill last year to give the newly created Financial Conduct Authority the power to cap the cost of credit. 

But there are many reasons why Wednesday's reports will be disappointing. Recommendations by the OFT rehash their existing guidance on lending rules. Indeed nothing much is changing, what they are now promising again to do is better enforce their own guidelines. 

For example 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.

Their call for better affordability assessments has always been stipulated for by the regulators. The other recommendations they have made, including transparency on how lenders collect their money and the need for forbearance measures, are also already catered for. The only difference being that they have been unable to properly enforce their regulations. Only time will tell whether that has changed. 

As for the BIS report the research into what effect a cap on the cost of credit will look like was only based upon research of interest rate caps. As the report itself says:

The available evidence about the impact of price restrictions on the cost that consumers pay for credit relates to interest rate restrictions, however, not the total charge for credit.

We might excuse this on the grounds that no other country puts a cap on the total cost of credit, while many other countries have interest rate caps. But the government should waste no more time on this and assess properly what kind of regulation we really need to ensure borrowers are not paying over the odds for their credit. 

Essentially all that BIS, who commissioned the Personal Finance Research Centre at the University of Bristol to carry out the research, have done is look at what will happen if you remove the supply of credit when there is high demand. Inevitably, in isolation, this will be detrimental to consumers.

Government focus, however, should be on how to get payday lenders themselves to reduce their front end fees like administrative costs. There needs to be greater transparency on how these costs are realised and work should be done with the payday lending industry to see if those costs can be cheaper for the borrower.

Focus should also be laid upon how mainstream banks can incorporate those borrowers who might otherwise seek high cost credit, which itself is detrimental to their personal finances, discourages savings behaviour or putting money away for a rainy day, and impacts negatively on consumer-led growth.

Furthermore government needs to look into building up alternative lenders such as non-profit credit unions, who sell credit at a much cheaper rate of interest, and provide debt management advice for those in vulnerable situations. 

And lastly more focus should be put on addressing the root cause of the growth in the payday lending industry: stagnating wages; the rising cost of living; and high unemployment.

We can draw some positivity from this latest news, but it is largely symbolic. In truth the findings of both reports will only scratch the surface of the problem. Far more work needs to be done, and fast, as personal debt crises, bolstered by payday lenders, are taking grip of vulnerable households right now. 

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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Four times Owen Smith has made sexist comments

The Labour MP for Pontypridd and Jeremy Corbyn’s Labour leadership rival has been accused of misogynist remarks. Again.

2016

Wanting to “smash” Theresa May “back on her heels”

During a speech at a campaign event, Owen Smith blithely deployed some aggressive imagery about attacking the new Prime Minister. In doing so, he included the tired sexist trope beloved of the right wing press about Theresa May’s shoes – her “kitten heels” have long been a fascination of certain tabloids:

“I’ll be honest with you, it pained me that we didn’t have the strength and the power and the vitality to smash her back on her heels and argue that these our values, these are our people, this is our language that they are seeking to steal.”

When called out on his comments by Sky’s Sophy Ridge, Smith doubled down:

“They love a bit of rhetoric, don’t they? We need a bit more robust rhetoric in our politics, I’m very much in favour of that. You’ll be getting that from me, and I absolutely stand by those comments. It’s rhetoric, of course. I don’t literally want to smash Theresa May back, just to be clear. I’m not advocating violence in any way, shape or form.”

Your mole dug around to see whether this is a common phrase, but all it could find was “set back on one’s heels”, which simply means to be shocked by something. Nothing to do with “smashing”, and anyway, Smith, or somebody on his team, should be aware that invoking May’s “heels” is lazy sexism at best, and calling on your party to “smash” a woman (particularly when you’ve been in trouble for comments about violence against women before – see below) is more than casual misogyny.

Arguing that misogyny in Labour didn’t exist before Jeremy Corbyn

Smith recently told BBC News that the party’s nastier side only appeared nine months ago:

“I think Jeremy should take a little more responsibility for what’s going on in the Labour party. After all, we didn’t have this sort of abuse and intolerance, misogyny, antisemitism in the Labour party before Jeremy Corbyn became the leader.”

Luckily for Smith, he had never experienced misogyny in his party until the moment it became politically useful to him… Or perhaps, not being the prime target, he simply wasn’t paying enough attention before then?

2015

Telling Leanne Wood she was only invited on TV because of her “gender”

Before a general election TV debate for ITV Wales last year, Smith was caught on camera telling the Plaid Cymru leader that she only appeared on Question Time because she is a woman:

Wood: “Have you ever done Question Time, Owen?”

Smith: “Nope, they keep putting you on instead.”

Wood: “I think with party balance there’d be other people they’d be putting on instead of you, wouldn’t they, rather than me?”

Smith: “I think it helps. I think your gender helps as well.”

Wood: “Yeah.”

2010

Comparing the Lib Dems’ experience of coalition to domestic violence

In a tasteless analogy, Smith wrote this for WalesHome in the first year of the Tory/Lib Dem coalition:

“The Lib Dem dowry of a maybe-referendum on AV [the alternative vote system] will seem neither adequate reward nor sufficient defence when the Tories confess their taste for domestic violence on our schools, hospitals and welfare provision.

“Surely, the Liberals will file for divorce as soon as the bruises start to show through the make-up?”

But never fear! He did eventually issue a non-apology for his offensive comments, with the classic use of “if”:

“I apologise if anyone has been offended by the metaphorical reference in this article, which I will now be editing. The reference was in a phrase describing today's Tory and Liberal cuts to domestic spending on schools and welfare as metaphorical ‘domestic violence’.”

***

A one-off sexist gaffe is bad enough in a wannabe future Labour leader. But your mole sniffs a worrying pattern in this list that suggests Smith doesn’t have a huge amount of respect for women, when it comes to political rhetoric at least. And it won’t do him any electoral favours either – it makes his condemnation of Corbynite nastiness ring rather hollow.

I'm a mole, innit.