Finally - a bill that could actually do something to regulate the payday lending industry

Blomfield's private members' bill includes measures to set new rules around the affordability of loans, payday loan advertising, debt collection and payment, debt support, and penalties for companies who fail to comply with existing regulator guidance.

It's Monday 1 June, the government are under pressure to do something about the payday lending industry, a summit is set up, but before proceedings even begin it's noted that the discussion will not tackle modifying the price of high cost credit. Instead it will be a light conversation on what cosmetic changes can be agreed to.

On the same day Wonga's chief executive Errol Damelin told an audience at a conference on money banking and finance hosted by Wired magazine in Canary Wharf: "We'd love as serious a regulator as possible to help understand the business, and the more proactively engaged our regulators are the better."

He's talking about the Office of Fair Trading (OFT), the same regulators as the ones who earlier in the year threatened tougher compliance checking before sending letters out to each payday lender operating in the UK. He's also talking about the same OFT who Wonga had to write an open letter to informing them that they had not sent over any “specific information” for them yet.

This is why I support the private members' bill by Paul Blomfield MP, which gets its second reading this Friday. Left up to the current administration very little would get done to the light-touch regulatory structure over this controversial industry. The outcome of the summit is still more waiting around, regulators sitting on their hands, action to properly address high cost credit not being carried out.

Blomfield's bill includes measures to set new rules around the affordability of loans, payday loan advertising, debt collection and payment, debt support, and penalties for companies who fail to comply with existing regulator guidance.

The details and strengths of the bill are straightforward. The Financial Conduct Authority (FCA), who take over from the OFT on regulating payday lenders in April 2014, will be able to cap the cost at which a lender can charge you for credit – which at the moment is around £30-35 per every £100 borrowed over a 30 day period – to a reasonable proportion of a borrower's income.

Consider now how unreasonable this cost is today. Let's say you take out £100 from a payday lender, typically you can end up paying back around £130, provided it's paid back on time. If you arrange an authorised overdraft of £100 from your bank, for example, you would pay back £101.60, which includes the £100 principle and £1.60 in interest (though many banks allow overdrafts of this cost to be interest or fee-free).

Let's take another example. If you take out a payday loan of £300 (just above the average £270 which was borrowed in 2012) you would pay back £390 if you paid back on time after 30 days. With a credit union loan of £300 it would cost £4.47 in interest. Paying back £304.47 rather than £390 is a no-brainer.

The other strengths of the bill include setting advertising standards for the industry showing how much you could spend on a loan from a payday lender in pounds and pence, rather than at the annualised percentage rate (APR). Advertising would also have to show a "health warning" sign, to show that it is rarely the best form of credit to apply for in hard times.

The bill also calls for a freeze on all charges when a person with a payday loan misses a payment, the obligation for lenders to signpost free impartial advice on debt, and enforcement powers to be determined, such as compensation, if the details of this Act (if it becomes an Act) are breached.

What Paul Blomfield MP has done in his bill is absolutely necessary. The new FCA regulation was supposed to have teeth but as we find out more of the detail there are already gaps emerging. Furthermore the government, though in principle wanting to tackle predatory lending, are flagging. This bill is a corrective to all that.

A sign for a loan shop on Brixton High Street in London. 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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“I felt very lonely”: addressing the untold story of isolation among young mothers

With one in five young mothers lonely “all the time”, it’s time for employers and services to step up.

“Despite having my child with me all the time, I felt very lonely,” says Laura Davies. A member of an advisory panel for the Young Women’s Trust, she had her son age 20. Now, with a new report suggesting that one in five young mums “feels lonely all the time”, she’s sharing her story.

Polling commissioned by the Young Women’s Trust has highlighted the isolation that young motherhood can bring. Of course, getting out and about the same as you did before is never easy once there’s a young child in the picture. For young mothers, however, the situation can be particularly difficult.

According to the report, over a quarter of young mothers leave the house just once a week or less, with some leaving just once a month.

Aside from all the usual challenges – like wrestling a colicky infant into their jacket, or pumping milk for the trip with one hand while making sure no-one is crawling into anything dangerous with the other – young mothers are more likely to suffer from a lack of support network, or to lack the confidence to approach mother-baby groups and other organisations designed to help. In fact, some 68 per cent of young mothers said they had felt unwelcome in a parent and toddler group.

Davies paints what research suggests is a common picture.

“Motherhood had alienated me from my past. While all my friends were off forging a future for themselves, I was under a mountain of baby clothes trying to navigate my new life. Our schedules were different and it became hard to find the time.”

“No one ever tells you that when you have a child you will feel an overwhelming sense of love that you cannot describe, but also an overwhelming sense of loneliness when you realise that your life won’t be the same again.

More than half of 16 to 24-year-olds surveyed said that they felt lonelier since becoming a mother, with more than two-thirds saying they had fewer friends than before. Yet making new friends can be hard, too, especially given the judgement young mothers can face. In fact, 73 per cent of young mothers polled said they’d experienced rudeness or unpleasant behaviour when out with their children in public.

As Davies puts it, “Trying to find mum friends when your self-confidence is at rock bottom is daunting. I found it easier to reach out for support online than meet people face to face. Knowing they couldn’t judge me on my age gave me comfort.”

While online support can help, however, loneliness can still become a problem without friends to visit or a workplace to go to. Many young mothers said they would be pleased to go back to work – and would prefer to earn money rather than rely on benefits. After all, typing some invoices, or getting back on the tills, doesn’t just mean a paycheck – it’s also a change to speak to someone old enough to understand the words “type”, “invoice” and “till”.

As Young Women’s Trust chief executive Dr Carole Easton explains, “More support is needed for young mothers who want to work. This could include mentoring to help ease women’s move back into education or employment.”

But mothers going back to work don’t only have to grapple with childcare arrangements, time management and their own self-confidence – they also have to negotiate with employers. Although the 2003 Employment Act introduced the right for parents of young children to apply to work flexibly, there is no obligation for their employer to agree. (Even though 83 per cent of women surveyed by the Young Women’s Trust said flexible hours would help them find secure work, 26 per cent said they had had a request turned down.)

Dr Easton concludes: “The report recommends access to affordable childcare, better support for young women at job centres and advertising jobs on a flexible, part-time or job share basis by default.”

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland