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.
 

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Jeremy Corbyn's speech on terrorism will do him more good than harm

The Labour leader's criticism of police cuts and western foreign policy will resonate with voters.

The election campaign, if there was any doubt, has resumed. In his speech responding to the Manchester attack, Jeremy Corbyn did not limit himself to expressions of sympathy and solidarity. He squarely targeted Theresa May on her home turf: policing and security.

The Conservatives' repeated warning is that Corbyn is a "threat" to his country. But the Labour leader countered that only he could keep it "safe". Austerity, he declared, "has to stop at the A&E ward and at the police station door. We cannot be protected and cared for on the cheap." May, having been warned by the Police Federation while home secretary of the danger of cuts, is undoubtedly vulnerable on this front. Under Labour, Corbyn vowed, "there will be more police on the streets" (despite Diane Abbott's erroneous arithmetic), while the security services would receive whatever resources they need.

Corbyn swiftly progressed to foreign policy, the great passion of his political life. Though it is facile to reduce terrorism to a "blowback" against western interventionism (as if jihadists were Pavlovian dogs, rather than moral agents), it is blinkered to dismiss any connection. As Corbyn noted: "Many experts, including professionals in our intelligence and security services have pointed to the connections between wars our government has supported or fought in other countries, such as Libya, and terrorism here at home" (the Tory-led Foreign Affairs Select Committee is among those who agree).That the former Stop the War chair has long taken this view absolves him of the charge of crude political opportunism.

Corbyn was also more careful than his pre-briefed remarks suggested to caveat his criticisms. He emphasised: "Those causes certainly cannot be reduced to foreign policy decisions alone. Over the past fifteen years or so, a sub-culture of often suicidal violence has developed amongst a tiny minority of, mainly young, men, falsely drawing authority from Islamic beliefs and often nurtured in a prison system in urgent need of resources and reform.

"And no rationale based on the actions of any government can remotely excuse, or even adequately explain, outrages like this week’s massacre."

But he maintained his central charge: western intervention has made the world more dangerous, not less. "We must be brave enough to admit the war on terror is simply not working," he said. "We need a smarter way to reduce the threat from countries that nurture terrorists and generate terrorism."

Though Corbyn's arguments have appalled Conservatives (and some in Labour), they are ones that will likely find favour among the public. Polls have consistently shown that most voters oppose western adventurism and believe it has endangered the UK. Corbyn's words will resonate among both the anti-interventionist left and the isolationist right (this is, after all, a country which has just voted to retreat from even its closest neighbours).

The speech, given at 1 Great George Street (in the room where Ed Miliband gave his resignation address), was marred by Corbyn's refusal to take questions. But it was unarguably well-delivered. "Let’s have our arguments without impugning anyone’s patriotism and without diluting the unity with which we stand against terror," he warned in a pre-emptive strike against the Conservatives.

Corbyn's decision to give an overtly political speech four days after the Manchester attack is being widely described as a "gamble" or even a profound error. But the election will now rightly focus more closely on the issue of security - nothing should be beyond democratic debate.

Many of Corbyn's life-long stances, such as unilateral disarmament, do not find favour with the electorate. But there was little in his speech today that the average voter would contest. The Conservatives will hope to turn the heightened security debate to their advantage, ruthlessly quoting Corbyn against himself. But on this front, as on others, the Labour leader is proving a tougher opponent than they anticipated.

George Eaton is political editor of the New Statesman.

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