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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#Match4Lara: Lara has found her match, but the search for mixed-race donors isn't over

A UK blood cancer charity has seen an "unprecedented spike" in donors from mixed race and ethnic minority backgrounds since the campaign started. 

Lara Casalotti, the 24-year-old known round the world for her family's race to find her a stem cell donor, has found her match. As long as all goes ahead as planned, she will undergo a transplant in March.

Casalotti was diagnosed with acute myeloid leukaemia in December, and doctors predicted that she would need a stem cell transplant by April. As I wrote a few weeks ago, her Thai-Italian heritage was a stumbling block, both thanks to biology (successful donors tend to fit your racial profile), and the fact that mixed-race people only make up around 3 per cent of international stem cell registries. The number of non-mixed minorities is also relatively low. 

That's why Casalotti's family launched a high profile campaign in the US, Thailand, Italy and the US to encourage more people - especially those from mixed or minority backgrounds - to register. It worked: the family estimates that upwards of 20,000 people have signed up through the campaign in less than a month.

Anthony Nolan, the blood cancer charity, also reported an "unprecedented spike" of donors from black, Asian, ethcnic minority or mixed race backgrounds. At certain points in the campaign over half of those signing up were from these groups, the highest proportion ever seen by the charity. 

Interestingly, it's not particularly likely that the campaign found Casalotti her match. Patient confidentiality regulations protect the nationality and identity of the donor, but Emily Rosselli from Anthony Nolan tells me that most patients don't find their donors through individual campaigns: 

 It’s usually unlikely that an individual finds their own match through their own campaign purely because there are tens of thousands of tissue types out there and hundreds of people around the world joining donor registers every day (which currently stand at 26 million).

Though we can't know for sure, it's more likely that Casalotti's campaign will help scores of people from these backgrounds in future, as it has (and may continue to) increased donations from much-needed groups. To that end, the Match4Lara campaign is continuing: the family has said that drives and events over the next few weeks will go ahead. 

You can sign up to the registry in your country via the Match4Lara website here.

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.