Payday loans defended by new consumer champion

Head of a City watchdog, Sue Lewis, compares taking a high-interest loan with dining out on her credit card

The UK's newest consumer champion has unmasked herself as a "surprising" cheerleader for the contentious payday loan industry. Sue Lewis, the new chair of a City watchdog, thinks the high-cost loans have been "demonised" at the expense of other problems in the credit market.

In an interview with The Independent on Sunday, Ms Lewis hit out at the "middle-class value judgements" that she thinks get made about people seeking payday loans, which charge ruinous rates of interest. She sees no difference between putting £50 for a meal out on her credit card and people borrowing the same amount from a payday lender for a night out. "No one would make a value judgement about whether I was paying that back at the end of the month or not."

Ms Lewis, 60, who will serve a three-year term at the head of the Financial Services Consumer Panel, called payday loans "a good product" that people "clearly want", acknowledging: "You may be surprised by my view on payday lending."

Ed Miliband recently became the latest politician to declare war on payday lending companies, warning that a Labour government would hit them with higher taxes. The Archbishop of Canterbury has joined in, vowing to put companies such as Wonga, one of the most prominent, out of business.

Ms Lewis said she was no apologist, admitting there were problems. But she thinks problems are equally bad at more reputable financial institutions, such as high street banks, which also charge sky-high interest rates.

"A lot of the industry has very, very bad practices [such as] rollovers and continuous payment authorities [regular, automatic payments]. All those things have got a lot of people into trouble very quickly. But I think the market has been really demonised. Actually, things that are just as bad go on in banks or credit cards, such as having your credit card limit increased, or the bank letting you slip into an overdraft and charging you."

Although payday lenders are braced for tougher regulation when they come under the aegis of the Financial Conduct Authority next spring, Ms Lewis cautioned against coming down too heavily on the industry. "I don't think the solution is to close the market down in effect by over-regulating it. I think the solution is to really clean it up, so that the providers left in it are very good. Hopefully the prices will drop and there will be more competition." She does not think capping the cost of credit is a good idea. "The problem with a price cap is it becomes the price. The price rises to the cap."

Her opinions are likely to prove controversial. Consumer campaigners such as Martin Lewis (no relation), who runs the popular MoneySavingExpert site, believe the industry preys on Britain's "financially illiterate" society.

"It is a hideous industry," he said. "Many [companies] are near morally criminal in my view." He thinks competition doesn't work and is a big believer in "more interventionist policy" to protect consumers.

A recent Which? report found that 1 million families are forced to take out payday loans every month to cope with the rising cost of living; nearly 400,000 need the money for essentials such as food and fuel.

Ms Lewis said it was wrong if people needed the money to eat and that no financial institution should lend money to people who can't afford to pay it back. "If people are borrowing to eat, that's a social problem that no amount of regulation can fix."

She will meet her fellow Consumer Panel members next week to set the body's priorities. She would like these to include tackling the "cross subsidies" charged by banks, which means that people racking up overdraft charges pay for those who bank for free by keeping their accounts in credit. She would also like to see clearer communications from banks with their consumers.

"One of my big passions is the industry talking to consumers in a language that they understand. That is the genius of the Wonga message. Straight-talking money. How much do you want? How long do you want it? That is the whole story. And it's quite attractive.

" There's nothing to stop financial services communicating in that way to customers, but actually it's become a sort of a nuclear proliferation. More pages of terms and conditions so customers buy or are sold the wrong thing, so they make a claim, so there are more pages of terms and conditions and the whole thing just escalates."

She added: "I think there needs to be an arms amnesty here. We need to take a step back and say, 'Actually, what would really be the best way for consumers to be served about the information they get about products?'"

Ultimately, she would like to see "banks treating their customers better". "It's kind of obvious to the normal person on the street what that means," she said.

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Life and Style
Couples have been having sex less in 2014, according to a new survey
New Articles
i100... with this review
Holly's review of Peterborough's Pizza Express quickly went viral on social media
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
Blahnik says: 'I think I understand the English more than they do themselves'
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam