TOMORROW’S meeting between ministers, consumer groups and payday lenders could be an awkward affair.
The summit, coming just days after the Office of Fair Trading (OFT) referred the payday lending sector to the Competition Commission, helps create the illusion of a concerted crackdown on payday lenders.
But payday lenders may turn up wondering who will be on whose side. Because in recent times they have been able to count on the government as a useful ally.
Groups present will include the likes of Citizens Advice and the StepChange debt advice charity, both inundated by demand from payday loan debtors.
They’re also among the critics to have rightly pointed to the government’s role in helping create the payday loan boom. If payday lenders turn up laden with presents for the government, it’ll be in return for the latest policy measure they might as well have drawn up themselves. Given the cosy links between certain payday loan firms and several Tory MPs it’s a possibility that can’t be ruled out.
George Osborne’s Spending Review announcement that the unemployed will have to wait seven days before claiming benefits is a gift for payday lenders. If a single policy could drive up payday loan demand even further, this may be it.
Like the welfare reforms introduced in April it’s a measure that will force yet more Scottish households into financial hardship and into the arms of the waiting payday lenders. The industry has been growing for years, but it’s the government’s targeting of the vulnerable in society that has propelled the most rapid growth.
The OFT has stepped up its actions in recent months and the Competition Commission referral could have an impact if it looks at the right areas. Regulation of the sector passes next April to the Financial Conduct Authority, and its chief executive has pledged to crack down on abusive practices. It has the tools to address many excesses of the industry, and hopefully it also has the will.
But payday loan companies know that time is on their side. So too, thanks to the government gift that keeps on giving, are market conditions.
The sun may (slowly) be setting on the worst excesses of the payday lending industry but they’ll be making plenty of hay whilst it shines.