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.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Content Writer - Global Financial Services

    £25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Web Developer - PHP

    £35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...

    Recruitment Genius: Field Sales Consultant - Financial Services - OTE £65,000

    £15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...

    Recruitment Genius: Loan Underwriter

    £18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...

    Day In a Page

    A nap a day could save your life - and here's why

    A nap a day could save your life

    A midday nap is 'associated with reduced blood pressure'
    If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

    If men are so obsessed by sex...

    ...why do they clam up when confronted with the grisly realities?
    The comedy titans of Avalon on their attempt to save BBC3

    Jon Thoday and Richard Allen-Turner

    The comedy titans of Avalon on their attempt to save BBC3
    The bathing machine is back... but with a difference

    Rolling in the deep

    The bathing machine is back but with a difference
    Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

    Conservatives plot a motoring revolution

    Draft report reveals biggest reform to regulations since driving test introduced in 1935
    The Silk Roads that trace civilisation: Long before the West rose to power, Asian pathways were connecting peoples and places

    The Silk Roads that trace civilisation

    Long before the West rose to power, Asian pathways were connecting peoples and places
    House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled

    The honours that shame Britain

    Outcry as donors, fixers and MPs caught up in expenses scandal are ennobled
    When it comes to street harassment, we need to talk about race

    'When it comes to street harassment, we need to talk about race'

    Why are black men living the stereotypes and why are we letting them get away with it?
    International Tap Festival: Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic

    International Tap Festival comes to the UK

    Forget Fred Astaire and Ginger Rogers - this dancing is improvised, spontaneous and rhythmic
    War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

    Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

    Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
    Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

    'A subversive brothel keeper and Communist'

    Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
    Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

    BBC heads to the Californian coast

    The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
    Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

    Victorian fraudster who shook the Bank of England

    Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
    Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

    Car hacking scandal

    Security designed to stop thieves hot-wiring almost every modern motor has been cracked
    10 best placemats

    Take your seat: 10 best placemats

    Protect your table and dine in style with a bold new accessory