Jeff Salway: Banks allow payday lenders to thrive

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THE City watchdog has been accused of all manner of regulatory failures over the past decade, usually with justification.

That the Financial Services Authority (FSA) was asleep on the job ahead of the credit crunch and the financial crisis is without question.

Yet it can’t be blamed for everything. Last week it was described bizarrely as a “middle-class regulator”, on the basis that it has engaged only with people who “could have had a better deal”, rather than those who needed the most protection.

It was also held responsible for failing to stem the rise of payday lenders, yet they are outside its remit.

The claim that the FSA is a middle-class regulator allowing payday lending spin out of control came from the chief of TheCityUK, a body representing banks, insurers, asset managers and other financial services. That’ll be the same banks and insurers responsible for a string of mis-selling scandals ripping off consumers of all income levels, not least middle income savers and investors. Equitable Life, endowments, interest-only mortgages, payment protection insurance, precipice bonds, Arch Cru, KeyData... the list could go on and on.

The FSA has done too little to protect consumers of all socioeconomic levels, so the idea that it serves the interest of a certain swathe of society is laughable. The hypocrisy mounts when you wonder why a mouthpiece for banks and insurers is suddenly interested in payday lenders.

That, again, will be the banks that have failed to provide a mainstream alternative to payday loans. The banks that once couldn’t give out loans quickly enough will now provide affordable finance only to those with impeccable credit records. The rest are being driven into the arms of grateful payday lenders. The payday lending phenomenon is clearly convenient for the banks. We can expect to hear more of this rubbish, but don’t forget their role in helping that industry thrive.

More incompetence

The Autumn Statement is covered in greater detail elsewhere on this page. But one measure that slipped through almost unnoticed was a scheme that was given distinctly short shrift when it was trailed a few weeks ago.

There was rare consensus across the board when George Osborne first proposed that workers could forfeit certain employment rights in return for shares in their employer; no one thought it was a good idea. Employer organisations said it was unworkable. Tax bodies warned that it was complex and dangerous, as did share ownership groups and employee representatives.

For all the benefits of employee share ownership, it was obvious that here was just another sly way for the government to hack away at worker’s rights.

I thought there was little prospect of the proposal seeing the light of day. I was wrong. Under the scheme, taking effect in April, employees will be allowed to receive between £2,000 and £50,000 of CGT-exempt shares in their employer, provided they waive their rights on redundancy, flexible working and unfair dismissal.

It’ll result in people coerced into the arrangements losing both money and rights as a result, undermine decent share ownership schemes and jeopardise job security at a time when consumer confidence needs bolstering. It will also give unscrupulous companies a new tax loophole to exploit.

It’s a solution to a problem that doesn’t exist, which in turn will create all manner of problems. Well done George, that’s some achievement even by your remarkably incompetent standards.

Twitter: @vaughansalway