Summing up: We need alternatives to payday loans
THAT the Wonga brand is to adorn the mono shirts of Newcastle Football Club seems apt, such is the black and white nature of the storm over payday lenders.
The breathless moralising over payday loans has left little room for nuance and practical debate, the result being that we’re getting nowhere in tackling the issue.
The backlash against the firms is justified, of course. Some are no better than legalised loan sharks in their taste for preying on the weak and vulnerable.
Wonga’s interest rate is a staggering 4,214 per cent APR. That’s an annual rate, of course, and assumes the loan is taken for a year, when the loans are designed for short-term repayment. But even on that basis it’s unjustifiable.
Interestingly, Wonga’s presence on football shirts – it also sponsors Hearts and Blackpool, among others – tends to be in areas with high levels of personal debt.
Yet the issue is far from straightforward, as payday lenders are meeting a need. Awareness of their dubious practices has never been higher, but with incomes shrinking, debts rising and affordable credit in short supply, many people take out payday loans knowing the potential consequences but feeling they have little choice.
Formal regulation of payday lenders may well be in the offing, along with a possible cap on charges. But the only way to stop the payday loan industry in its tracks is to tackle the causes rather than the symptoms. The government’s inept management of the economy means demand for payday loans will only increase, so there’s an urgent need to provide better alternatives to payday loans. From greater access to, and awareness of, debt advice and credit unions to forcing banks to do more to help under-pressure customers, there are effective steps that can be taken.
But for now there’s a danger that any appetite for real action is being sated by the energy expended in the outpouring of righteous fury at the payday loans industry.
Part-time Osborne must work harder
CHANCELLOR George Osborne last week trotted out the moronic line that it’s unfair when people “going out to work see the neighbour next door with the blinds down because they are on benefits”.
Political commentators described this as Osborne’s strongest line. If they’re talking about dog-whistle politics, they’re probably right.
But the central assumption is disgusting: that anyone in work should resent people on benefits, who are all workshy scroungers. It’s classic divide-and-rule politics aimed at setting people against each other (although his perception of lazy neighbours is doubtless clouded by living next door to David Cameron).
Perhaps the blinds are down because the neighbour is disabled, has a terminal illness, has mental health difficulties or merely that, thanks to the government’s lack of growth policies, they simply cannot find a job.
That Osborne’s lust for spending cuts is driven by ideology can no longer be in doubt. Staggeringly, given it must be his top priority, the word “growth” didn’t appear once in his entire speech.
For a rich chancellor set to inherit unearned millions, Osborne really does have a thing about people getting only what they work for. And if he’s so obsessed with cutting spending and getting people back in work, the part-time chancellor should devote more energy to job creation and less to stirring up dangerous resentment and prejudice.
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