Vested Interests and Interest Rates – Time to Outlaw the Payday Bandits
The recent quizzing of the Bandits by the politicians has resembled a bunch of weak beardy teachers trying to deal with teenage gangsters without having the balls to take them on direct. Indeed the regulatory framework of financial services could be viewed as having the same characteristics as the culture of the education system (of the entire liberal democratic state?): meddling, didactic and bureaucratic but ultimately self-perpetuating and ineffectual. Fans of contemporary financial regulation will no doubt be aware of that guard dog minus balls and teeth “Treating Customers Fairly”.
Of course the reason for ineffectualness and its companion, cowardice, is always simple self interest. Whilst the Bandits may be jolly naughty boys who prey on the weak, the kind of money they generate as an industry is not something that can be apparently be done away with. And with Big Chief McWonga having at least attempted influence in the right places, the case for cynicism is overwhelming while the prospect of any meaningful action against this near criminal industry seem remote
One may though be equally cynical about some of the responses or lack of them from other sectors. First of all the Archbishop of Opportunism’s stated intention to put the Bandits out of business is as laughable as it impossible. Of course he could do as Jesus commanded and “sell all though hast and give to the poor” and at a stroke (given his personal and the Church’s wealth) end the need for anyone to do business with the Bandits. However I have yet to see any Christian organisation or individual do that so why should he break the mould? Similarly, credit unions and related “not-for-profit” lenders have not only failed to show a united front and step up to the mark, but have shown greater interest in charging the financially excluded for managing their affairs while grabbing as much funding as possible. But they are in the third sector and one could expect nothing less or more.
More bewildering is the failure of the credit card industry to do very much to counter the Bandits. As you will see in a forthcoming analysis (or you could find out for yourself) credit card borrowing is falling whilst Bandit lending is rising, which you would think would lead the industry to seek or retain (!) more customers rather than throwing increasingly silly 0% offers at existing customers. The Orwellian rigours of the credit reference agencies combined with the efficiencies of contemporary business processes mean its never been easier for lenders to keep borrowers under control, as the Bandits have most ably demonstrated. Yes there are one or two cards that have popped up aimed at those who can’t even get a Vanquis card, but their marketing has been half-hearted.
Of course, The Amateur Analyst is only too well aware that the customers of the Bandits are those who (whatever the Bandits may say) have no access to even a Vanquis card, let alone an overdraft or a tasty 0% offer but as McWonga has explaned, (as if it was something to be proud of), they turn down more applicants than they accept, and those they do accept they so comprehensively nail down in terms of repayment control, surely it cannot be beyond the wit of say, SAV credit to come up with a card that would offer a passably humane interest rate whilst incorporating a repayment process that de-risked the inevitability of assault by the chronically useless and the professional defaulter.
Meanwhile people already in so much trouble they have no other options are daily being done over by the Bandits. So with so much demand and so much profit what pray (if you’ll pardon the word) is to be done? Easy it’s like this….
Pass a law (remember them?) which limits the APR any lender can levy on borrowers and restricts any charges. This is the real problem for any Bandit victim and not the conditionality attached which allows the Bandits to clean out a victim’s bank account. We can all stop direct debits at the click of a mouse or with a phone call after all.
How about 50% APR and 2% for the service charge. Just a suggestion, but that’s high enough and more than I’d pay even if it meant starving to death.
Whatever, setting limits down in law would be relative simple, easy to understand and a piece of cake to enforce. Alright, it would require careful drafting, but in principle it could be done in a simple, swift, Private Members Bill which would be so popular not even the Lords would hold it up. And any lender that couldn’t make money at those rates? Well I’m sorry they shouldn’t be in business on good management grounds never mind any moral ones.
So how about it. Would any lefty Labour type, you know the ones that rant about equality and how the Tories don’t know the price of beans at Aldi, care to make their name and their party more electable by going for it? Would anyone?
The Amateur Analyst does not believe the ensuing rush will constitute a health and safety issue.
Lend me a tenner until the end of the week anybody?