Julian Knight: It will take more than a law to end payday abuses
Legislation to cap the credit on loans is welcome, but there also needs to be a change attitude in the regulators
Sunday 02 December 2012
Just because there is a law in place it doesn't mean it will be enforced. No, I'm not talking about the media or Leveson but the latest moves in the ongoing saga of payday loans.
Consumer groups and MPs were delighted that the Financial Conduct Authority – the successor body to the Financial Services Authority – is to be given the power to cap the total cost of credit on loans. After a decade of people like me suggesting such powers would be a good idea, and politicians of all persuasions gnashing their teeth and saying it was unworkable (meaning their banker friends wouldn't like it), in one afternoon it seems we are going to have new laws for just that. It has taken the influx of payday lenders who don't have the lobbying power of the high street banks to bring about this change of heart.
Now, I welcome this, but if the politicians think the job is done on ending the abuses in some parts of the payday industry, they have another think coming. The fact is that if the FSA had had these powers it would probably have done very little – culturally it wasn't atunded to action until very late in its life. The FCA needs to be different in its personnel and outlook and not afraid to make use of this new power – and not just target payday.
In advance of this change, we need the Office of Fair Trading to follow through on its commitment to clean up the industry and chuck some of the worst offenders out of business.
There is room for payday, but it needs to treat customers fairly, be completely upfront on charges and have its advertising strictly monitored.
Please, George, no harebrained schemes
The Chancellor will stand up to deliver his Autumn Statement – more actually a winter statement judging by the temperature outside – on Wednesday. His objective will not only be to find ways of boosting growth so that we can finally move away from recession, but to rescue his reputation.
Prior to the last Budget, and putting party politics aside, most would agree that George Osborne had performed better than many had expected during his tenure. He had been sound on deficit reduction and reacted well to the Irish financial crisis. Then came the "omnishambles" Budget – pasty taxes, caravan taxes, abolishing age allowances – it was poor and ill-judged.
Damian McBride, who has seen a shambles at close quarters – he was Gordon Brown's spin doctor – blogged that he recognised many of George's measures as the usual pre-occupations of Treasury officials, which in his time hadn't made it beyond first base.
Let's hope this time around Mr Osborne has learned how to say a firm "No" to officials and we are spared the harebrained schemes.
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