The FCA needs to be allowed to tackle the legal loan sharks

The new financial regulator ought to have payday lenders in its remit, writes Carl Packman.

Yesterday, Lord Parry Mitchell of Labour's BIS team in the House of Lords introduced an amendment to the Financial Services Bill to give the new Financial Conduct Authority (FCA) the power to set guidelines on the impact of lenders’ behaviour on consumers, which will, he writes, potentially include the capping of interest rate charges.

The FCA, which will take over the regulatory framework of the Office for Fair Trading (OFT) later this year, has received much scrutiny its planned remit. 

Many, such as Stella Creasy MP, were hopeful that with products such as payday loans being regulated "under one roof" by the FCA, the industry would be easier to get a grip on. That optimism  is no more.

Andrew Tyrie, the chairman of the Treasury select committee, in January this year argued that the creation of the FCA was an opportunity to improve upon the way in which the Financial Services Authority (FSA) regulated financial products. 

But he did also warn that: 

If we are not careful, the FCA will become the poor relation among the new institutions.

Without interventions like that of Lord Mitchell, a poor relation is exactly what the FCA is destined to be. 

Lord Mitchell's amendment calls for:

Power of the FCA to make further provision about regulation of consumer credit 

  1. The FCA may make rules or apply a sanction to authorised persons who offer credit on terms that the FCA judge to cause consumer detriment.
  2. This may include rules that determine a maximum total cost for consumers of a product and determine the maximum duration of a supply of a product or service to an individual consumer.

Without question the FCA should lay focus on responsible lending, which is the crux of the first clause, for time and time again payday lenders prove their inability to self-regulate.

A recent episode of Panaroma showed BBC reporter Richard Bilton collecting nearly £1000 in under two hours with relative ease and little questioning. At no point did any of the shops that Bilton entered assess or consider the adverse affects these loans could have on him – thus they were in breach of the OFT's guidance.

In June the councillor and New Statesman writer Rowenna Davis did her own investigation which found payday lenders such as Speedy Cash and pawnbrokers such as Albermarle Bond handing over cash to individuals for rent, food and even betting on horses. 

Even Wonga, one of the more well known payday lenders, has been shown to lend irresponsibly. During an interview in March 2011 by the Guardian journalist Amelia Gentleman, with the opportunity to showcase some examples of, in Gentleman's words, the "web-savvy young professionals that the company believes it's catering to", Wonga decided to showcase Susan. Gentleman writes of Susan:

She finds that with the cost of living rising, her benefits sometimes don't stretch to the end of the month, and has taken out loans with Wonga to buy food, if she's caught short. She's a bit vague, but thinks she's taken out half a dozen loans with Wonga over the past few months... She has had problems with credit cards before, and doesn't have an overdraft, but Wonga gave her credit very swiftly.

Not only will Susan's income be significantly less than that of the average person to take out a Wonga loan, according to Wonga themselves, she manages to be in that category of people who haven't access to mainstream forms of borrowing, has taken out nearly double the average payday loans per year per borrower (three and a half), has taken out exactly double the average amount of loans Wonga customers use and is still an example Wonga felt was a "good representative."

If Lord Mitchell's amendment isn't carried it will demonstrate a clear message from the government that they believe the regulatory architecture set up in place for payday lenders, now and in the future, is fine as it is – when in fact this is anything but the case.

Yesterday was a chance, again, for the government to prove that it is for responsible lending. Lord Newby assured Lord Mitchell that it is learning, but only time will tell. The amendment was withdrawn, pending further comments.

A pay day lender in Rochdale. 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.
 

#Match4Lara
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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.