Whatever the Tories would have you believe, poverty is on the up. Everywhere you turn there are desperate stories of evictions, hungry children and food banks. One of the consequences of this growing population of desperate people, is that investors have moved in. Where there’s desperation, there’s profit.
Pay day loan companies are taking over our high streets. Yes, of course there are examples of an emergency boiler repair and with no other source of credit, a family uses this service and has a positive experience. And of course this type of credit is more expensive as the risk of default has to be built in to ensure a return on the lenders’ investment. However, every single day, vulnerable people are being exploited. The Office of Fair Trading accused 50 named companies of “irresponsible lending”. I strongly disagree with anyone who believes annualised interest rates of over 5,000% are anything other than a disgrace.
When in Government Labour fought hard on this issue. Millions of pounds of resources were provided to ensure the most vulnerable in our society could access free debt advice (via the financial inclusion fund).
In opposition Labour have continued to fight hard on this issue. Despite not succeeding in the House of Commons, in the House of Lords, Labour have successfully forced through an amendment allowing regulators to control costs and loan duration.
And when Labour are back in Government this work will be able to accelerate and several plans have already been announced. Councils will receive new powers to control expansion of this industry in their areas (via planning laws), Labour will work hard to reduce stigma and increase awareness of the services provided by credit unions and Labour will re-introduce measures to improve financial literacy education.
The Tory record is extremely different.
Planning laws have been changed which has resulted in payday lenders expanding more easily.
In 2012 significant cuts to the financial inclusion fund were announced, including the loss of 500 specialist debt advisors.
As for the powers pushed through by Labour in the House of Lords, allowing the Government to force tighter regulation of this industry, well they haven’t bothered to use them. They have failed to seize this opportunity and have systematically failed to stand up for the most vulnerable in our society.
However, it must be very difficult for the Tories, what with payday lenders being their friends, donors and even employers. For example, how can we possibly expect Tory MP Sir Gerald Howarth, a paid consultant of QuickQuid (who feature on OFT’s list of 50), to step in and curb abuse carried out by payday lenders? We should all think about the difficult position the Tories are in, caught between the exploiters and the exploited.