Cap the cost of credit to make life easier for those forced to turn to payday loans

Tackling the legal loan sharks.

Today, Lord Mitchell, an opposition spokesperson for Business, Innovation and Skills, will debate an amendment he has introduced to the Financial Services Bill (now in the report stage in the House of Lords) to potentially cap the total cost of credit which lenders can charge (this is different to capping interest rates in so far as interest rate caps can be sidestepped by upping other costs such as administrative fees. Total cost caps seek to address this potential loophole).

Many peers, like Lord Sugar and Baroness Thompson-Grey, the Welsh former wheelchair racer and disability campaigner, have already pledged their support for his amendment, which will give the new Financial Conduct Authority the power to apply sanctions to those who offer credit contrary to the its terms.

But it's an amendment which everyone, from all political parties, should get behind and support.

It is good for consumers

While the payday lending industry has enjoyed unprecedented growth (worth £100m in 2004, now worth over £2bn in 2012) in recent times, credit access has become tougher for consumers. Around 1.75 million UK adults go without a transactional bank account in the UK today and 9 million adults cannot access credit from mainstream banks. This spells bad news for consumers as the only option for many is expensive short-term loans. Capping the costs of credit will make borrowing less expensive for consumers, at a time when wages are stagnant and the cost of living rises.

It is good for the economy

Damon Gibbons for the Centre for Responsible Credit, in their recent report on Japan and interest rate caps, noted that, all things considered, putting a ceiling on the amount a lender can charge for a loan will make borrowing less expensive - given the rate at which over-priced short-term lending has risen over the last few years. This will have a knock-on effect on saving behaviour and investment. Reinstatement of savings initiatives like the Savings Gateway should also boost this kind of behaviour.

It doesn't contradict the Tory message

Small-c conservatives in the Tory Party have always raised concern about how financial institutions can hurt, rather than help, the finances of those most vulnerable in society. But even those of a more free market bent inside the party have started to see what a problem payday lending is. Damian Hinds MP, chair of the All-party Parliamentary Group on Credit Unions, for example, once felt the market would drive down prices in payday lending, but has now decided that “normal market rules do not apply with payday lenders”.

It will not boost illegal money lending

Important work carried out in 2010 by Professor Dr. Udo Reifner, Sebastien Clerc-Renaud, and RA Michael, for the European Commission, found no convincing evidence to back up the argument introducing interest rate ceilings leads to a growth in illegal lending “or would force people into arrears and default on bill repayments”. In fact it is found in the same report that in spite of the fact the supply of credit in France and Germany is not as abundant as in the UK, this has not been matched by an increase in illegal lending.

A shark. Not a loan shark. 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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Prime Minister Jeremy Corbyn sitting down with President Bernie Sanders no longer sounds so outlandish

Both men have a certain authenticity and unpretentiousness that their rivals lack.

Unlike many of us, Bernie Sanders never doubted Jeremy Corbyn. The week before the general election, the independent US senator from Vermont was addressing a crowd of progressive voters in Brighton during a whirlwind tour of the UK. An audience member asked him what advice he might have for the leader of the Labour Party. “I don’t think Jeremy Corbyn needs my advice,” Sanders replied. “I think he’s doing quite well.”

The week after the election, a delighted Sanders invoked Corbyn’s election performance in a New York Times op-ed. “The British elections should be a lesson for the Democratic Party,” he wrote, urging the Democrats to stop holding on to an “overly cautious, centrist ideology” and explaining how “momentum shifted to Labour after it released a very progressive manifesto that generated much enthusiasm among young people and workers”.

Sanders and his growing movement in the United States offered more than mere rhetorical support for Corbyn.

With the help of former members of the senator’s presidential campaign team, Momentum – the grass-roots organisation set up to support and defend Corbyn in 2015 – ran 33 training sessions across the UK, preparing thousands of Labour activists.

Momentum’s national organiser Emma Rees says that the Sanders people made a “significant contribution” to the Labour campaign with their emphasis “on having empathetic conversations that focused on the issues the voter cared about, and actually trying to persuade voters on the doorstep rather than just collecting data”.

“In the final stage, I recruited a bunch of former Bernie volunteers from around [the United States] to . . . help get out a last [get out the vote] texting assignment,” recalls Claire Sandberg, who was the digital organising director for Sanders and spent the 2017 election campaign working with Momentum in the UK. “It was an amazing thing to see them volunteering . . . while we were all asleep the night before election day.”

Is it really surprising that Sanders supporters, thousands of miles away, would want to volunteer for Corbyn? Both men are mavericks; both have a certain authenticity and unpretentiousness that their rivals lack; both, in the words of Emma Rees, “have inspired tens of thousands of people to participate in the political process and to realise their collective power” and they want “to transform society in the interests of ordinary people”. Perhaps above all else, both men have proved that left populism can win millions of votes.

According to the latest polls, if another election were held in the UK tomorrow, Corbyn would be the winner. Sanders, however, has a much higher mountain to climb in the US and faces at least three obstacles that the “British Bernie” does not.

First, Sanders leads a growing grass-roots movement but does not have the support of a party machine and infrastructure.

Corbyn may have been a backbench rebel who voted against his party whip more than 500 times before becoming party leader, but he is a lifelong Labour member.

Sanders, on the other hand, is the longest-serving independent politician in US congressional history. He declared himself a Democrat in 2015 only in order to seek the party’s presidential nomination and promptly declared himself an independent again after he was defeated by Hillary Clinton last summer.

Such behaviour has allowed establishment Democrats to portray him (wrongly) as an opportunist, an interloper who is using the Democratic Party as a vehicle for his own benefit in a country where third-party candidacies cannot succeed.

Second, Sanders has to confront an even more hostile and sceptical media than Corbyn must. Under US law, Fox News is under no obligation to be “fair and balanced” towards Sanders – nor is CNN, for that matter.

Thanks to the UK rules on broadcaster impartiality, however, Corbyn was “able to speak directly to the voters who still get their news from TV instead of the internet”, Sandberg notes. “In contrast, Bernie was completely and totally shut out by broadcast media in the US, which considered his campaign totally irrelevant.”

Third, Sanders failed to connect with minority groups, and especially with African Americans, whereas black and Asian British voters flocked to Corbyn – a veteran campaigner for the anti-racism movement.

Two out of every three ethnic-minority voters voted Labour on 8 June. “Bernie would’ve won [the Democratic nomination] if he’d had a message that resonated with 50 per cent – just 50 per cent – of black voters, because Hillary got upwards of 90 per cent in many states,” the activist and journalist Naomi Klein, who is a supporter of both Sanders and Corbyn, told me in a recent interview for my al-Jazeera English show, UpFront, which will air later this month.

Nevertheless, she is confident that Sanders can learn lessons from his own campaign for the 2016 Democratic nomination, and “build a winning coalition” next time which ties together the narratives of financial, racial and gender inequality.

Just as it was a mistake to write off Jeremy Corbyn, it would be wrong to dismiss Bernie Sanders.

Despite media bias, and even though he doesn’t have a party machine behind him, Sanders today is still the most popular politician in the United States. And so this may be only the beginning of a new, transatlantic partnership between the two self-declared socialists. Those of us on the left who grew up watching Reagan and Thatcher, then Clinton and Blair, then Bush and Blair, may wish to pinch ourselves to check we’re not dreaming.

“I think by 2021,” Sandberg says, “we may see Prime Minister Jeremy Corbyn sitting down with President Bernie Sanders.”

Don’t say you weren’t warned.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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