Payday loans – a tale of two campaigns
Two announcements this week on short-term, high interest loans.
On the one hand, the Business Minister, Norman lamb, welcomed “the progress made by payday lenders as they published newly revised Codes of Practice to increase transparency and better help vulnerable borrowers”, while cautioning that “they need to maintain their focus on protecting consumers and tackling bad practice”.
Two announcements this week on short-term, high interest loans.
On the one hand, the Business Minister, Norman lamb, welcomed “the progress made by payday lenders as they published newly revised Codes of Practice to increase transparency and better help vulnerable borrowers”, while cautioning that “they need to maintain their focus on protecting consumers and tackling bad practice”.
On the other, Stella Creasy, Labour MP for Walthamstow and campaigner for interest rate caps on payday loans, launched a “Legal Loan shark Campaign Pack” calling on supporters to lobby councils, members of the House of Lords and others to restrict the activities of companies providing short-term, high interest loans.
The new Codes of Practice, which have been drawn up by the four trade associations who represent 90 per cent of the payday and short-term loan industry, set out clear guidelines.
They are very welcome, but it can't be forgotten that this is a sector which includes online sites advertising loans for such things as luxury weddings to people on benefits, with bad credit records or rent arrears.
The Business Minister stressed that the industry “must continue its commitment to root out rogue lenders and tackle bad practice” – a call which would be echoed by everyone working in debt advice.
He also said: “Payday loans should only ever be used as a short-term financial fix, not as a long-term solution to financial difficulties. I would urge people to think carefully before taking out a short term loan and to consider affordable alternatives such as their local Credit Union.”
Which comes really quite close to the core principles of Stella Creasy’s campaign –indeed one of her campaign suggestions is to distribute leaflets promoting local credit unions outside the high street premises of well-known short term lenders.
Are the two sides really getting closer? It seems unlikely, but two questions will be particularly telling:
Just how responsible will the credit checks on loans applicants now be? And who will police the new codes of practice?
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