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.
 

Photo: Getty Images/AFP
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Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.